State and Local Tax Rates in 2013

February 15, 2013

With a majority of tax discussion centered on federal tax policies, it is easy to forget about the lesser known retail sales and local sales taxes that residents of each state and locality pay, says Scott Drenkard, an economist with the Tax Foundation.

  • Alaska, Delaware, Montana, New Hampshire and Oregon do not have a statewide sales tax; Alaska and Montana allow localities to charge local sales taxes.
  • In Alaska, some localities charge high local rates but not enough to give Alaskans a higher combined tax rate than any state that charges a statewide rate.
  • Tennessee, Arizona, Louisiana, Washington and Oklahoma are the states with the highest average combined state and local rates. Alaska, Hawaii, Maine, Virginia, and Wyoming are the states with the lowest combined tax rates.
  • California, Indiana, Mississippi, New Jersey, Rhode Island and Tennessee all have state tax rates at or above 7 percent. Colorado, Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming have the lowest non-zero statewide tax rates at or below 4 percent.
  • Louisiana, Colorado, New York, Alabama and Oklahoma also have the highest average local sales tax rates.

The various tax rates in different localities have important effects on the economy. Research indicates that consumers leave high-tax areas to make major purchases in low-tax areas. Businesses also frequently locate just outside the borders of high sales tax areas and Delaware even reminds visitors on its welcome signs that it is the home of tax-free shopping.

  • These statistics and rankings of tax rates do not take into account the structure of sales taxes, defining what is taxable and non-taxable and population size.
  • The sales tax base is estimated to cover 34.46 percent of personal income in the United States.
  • Sales taxes are just one part of an overall tax structure and should be considered in context.

Source: Scott Drenkard, "State and Local Sales Tax Rates in 2013," Tax Foundation, February 11, 2013.

 

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