States With The Highest Sales Tax Rates
Ever hear of Tuba City, Arizona?
Probably not, unless you live in northern Arizona. It is a city of 8,600 or so mostly Navajo Indians, and it has the distinction of being one of the most taxed places in the United States. More specifically, Tuba City has the highest combined sales tax rate in the United States, at 13.725 percent.
Of that, 6.6 percent is the state sales tax rate, 1.125 percent is the county (Coconino County) sales tax rate, and an additional 6 percent is a sales tax levied by the To'Nanees'Dizi local government.
A high sales tax rate isn’t exactly bragging rights, as you can imagine. In fact, cities, counties and states with low sales tax rates tout that as one of the reasons why businesses should locate within their borders.
But a low state sales tax rate doesn’t necessarily equate to low sales taxes. That’s because some states with low or no sales tax rates allow cities and counties to enact their own sales tax rates. For example, Alaska does not have a state sales tax, but Juneau and Kodiak charge local state sales taxes of 5 percent and 6 percent, respectively. Montana, another state with no state sales tax, allows local resort areas to charge sales tax. However, Delaware, New Hampshire and Oregon, all of which charge no state sales tax, do not allow cities and counties to charge any sales tax.
The Tax Foundation, a non-partisan tax research group that “educates taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government,” came up with the numbers in this article.
When it comes to states that charge the highest sales tax rates, there is no way to neatly categorize them. Some are large in size and population, and some are small, and they are spread out, in the East, Midwest, South and West.
California has the nation’s highest state sales tax, with a rate of 7.25 percent, and that is despite a 1-percent reduction, which took effect on July 1, 2011.
Indiana, Mississippi, New Jersey, Rhode Island and Tennessee are tied for second, with a state sales tax rate of 7 percent. After those states comes another diverse group: Minnesota (6.88 percent), Nevada (6.85 percent), Arizona (6.6 percent), Washington (6.5 percent), Connecticut (6.35 percent), Kansas (6.3 percent) and Illinois, Massachusetts and Texas (all at 6.25 percent).
Of the states with the highest sales tax rates, officials in Nevada, Texas, Washington and Tennessee will point out that they have no state income tax there. (Alaska, South Dakota, New Hampshire and Wyoming also have no income tax.)
But when it comes to sales taxes, a high state sales tax rate doesn’t tell the whole story. As we already pointed out, many states allow their cities and counties to levy their own sales taxes on consumers.
Combined sales tax rates, which take into consideration state, county and city sales taxes, give the clearest picture of which states’ consumers pay the most sales taxes.
Based on state sales tax rates and average local sales tax rates, the states with 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). Rounding out the top 10 are Arkansas (8.58 percent), New York (8.48 percent), Alabama (8.33 percent), Kansas (8.26) and Illinois (8.20 percent)
The states that have no state sales tax and do not allow their cities and counties to charge sales tax obviously are at the low end of the combined sales tax spectrum. Other states toward the bottom are Alaska (1.77 percent), Hawaii (4.35 percent), Maine and Virginia (5.00 percent), Wyoming (5.34 percent) and South Dakota (5.39 percent).
Of the states that charge something for state sales taxes, Colorado charges the least, at 2.90 percent, but its average local sales tax rate is 4.54 percent, bringing its combined sales tax rate to 7.44 percent – the 15th highest in the nation.
As you can see from Tuba City, Arizona, average local sales tax rates also don’t tell the whole story because they are averages.
According to the Tax Foundation’s 2012 analysis, U.S. cities of 200,000 or more people with the highest combined state, county and city sales taxes are Birmingham, Ala., (10 percent), Montgomery, Ala., (10 percent), Long Beach, Calif., (9.75 percent), Los Angeles (9.75 percent), Oakland, Calf., (9.75 percent), Fremont, Calif., (9.75 percent), Chicago (9.75 percent), Glendale, Ariz. (9.6 percent), Seattle (9.5 percent) and San Francisco (9.5 percent).
There are a lot of peculiarities when it comes to sales tax rates, and that includes New Jersey, one of those states with a sales tax rate of 7.00 percent – tied for second highest in the nation. Except that the state exempts some counties there from charging statewide sales taxes. In those places, consumers are charged a local 3.5 percent sales tax.