NCPA - National Center for Policy Analysis

State and Local Sales Taxes in 2012

February 21, 2012

Sales taxes are among the most transparent forms of taxation that a government can levy, and the simplicity of sales taxes allows for state-by-state comparison, says Scott Drenkard, an economist with Tax Foundation.

In a new Tax Foundation analysis, Drenkard gives the population-weighted average of local taxes in each state.  This enables him to calculate a combined rate between the state and local sales taxes in order to demonstrate the real burden of sales taxes across the country.

  • The five highest combined rates are Tennessee (9.45 percent), Arizona (9.12 percent), Louisiana (8.85 percent), Washington (8.80 percent) and Oklahoma (8.66 percent).
  • Alaska, Delaware, Montana, New Hampshire and Oregon have the lowest combined rates because they do not have a statewide sales tax and only Alaska has any local sales taxes.
  • The single highest combined rate in the United States is in Tuba City, Arizona -- with a 6.6 percent state tax, a 1.125 percent Coconino county tax and a 6 percent tribal tax levied by the To'Nanees'Dizi local government, the locality has a combined rate of 13.725 percent.

Local rates are usually significantly smaller than the statewide rate, meaning that much of the combined rate is determined at the state level.

  • California, despite a 1 percent reduction in its sales tax rate that took effect July 1, 2011, still has the highest state-level rate at 7.25 percent.
  • Five states tie for the second-highest statewide rate with 7 percent each: Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.
  • Among states with a sales tax, Colorado's 2.9 percent rate is the lowest, followed by seven states that all levy a 4 percent tax: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming.

Some states do have an average local tax rate that is a significant contributor to the combined rate.

  • The five states with the highest average local sales tax rates are Louisiana (4.85 percent), Colorado (4.54 percent), New York (4.48 percent), Alabama (4.33 percent) and Oklahoma (4.16 percent).
  • The highest local rate is 7 percent in Wrangell, Alaska.

Source: Scott Drenkard, "State and Local Sales Taxes in 2012," Tax Foundation, February 14, 2012.

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