This morning we released our new study on state and local sales taxes. (We put it out twice a year.)
As you probably know, we put out state sales tax rate information. But in 37 states, the state sales tax rate only tells you part of the story because of 9,600+ local sales tax rates. This report produces an average local sales tax rate for each state, by combining our data with data from the respected Sales Tax Clearinghouse, which we weigh using Census population data. The result is a combined state and average local sales tax by state, as of July 1, 2012. We also include minimum and maximum local rates.
Some key findings:
- The five states with the highest average combined rates are Tennessee (9.43 percent), Arizona (9.12 percent), Louisiana (8.86 percent), Washington (8.83 percent), and Oklahoma (8.68 percent).
- The five states with the lowest average combined rates are Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent), Wyoming (5.18 percent), and Wisconsin (5.43 percent). (Experts generally agree that Hawaii has the broadest sales tax in the United States, taxing many products multiple times and, by one estimate, ultimately taxing 99 percent of the state's personal income. This base is far wider than the national median, where the sales tax base applies to 35 percent of personal income. New Mexico and South Dakota also have very broad sales tax bases.)
- 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.
- The lowest non-zero statewide sales tax is in Colorado, with a rate of 2.9 percent.
- The five states with the highest average local sales tax rates are Louisiana (4.86 percent), Colorado (4.52 percent), New York (4.48 percent), Alabama (4.37 percent), and Oklahoma (4.18 percent).
- Mississippi has the lowest non-zero average local rate of 0.004 percent, attributable to the state's only local sales tax: a 0.25 percent sales tax in Tupelo, the birthplace of Elvis Presley, with a current population of 34,546.
- While many factors influence business location and investment decisions, sales taxes are something within policymakers' control that can have immediate impacts.
The full report, "State and Local Sales Taxes at Midyear 2012" by Scott Drenkard, and the table of rates and rankings, are here. You can also download the PDF here.
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