D.C. Poised to Have Area’s Lowest Sales Tax for First Time in 45 Years

September 20, 2013

Joseph Bishop-Henchman

Joseph Bishop-Henchman

On October 1, 2013, the District of Columbia sales and use tax will drop from 6 percent to 5.75 percent. The tax cut brings the rate back to where it was before a recession-induced tax increase in 2010. (The 10 percent meals tax, 18 percent parking tax, 12 percent tobacco tax, and 14.5 percent hotel tax will not change.)

What may surprise most people is that, with this change, Washington, D.C. will now have a lower sales tax than both neighboring northern Virginia and Maryland (both 6 percent). This is only the second time in history that this has happened (1968 was the other, see table), and challenges the common conception of high-tax DC next to low-tax Virginia. While DC is cutting its sales tax, Maryland will retain a 2008 sales tax increase from 5 percent to 6 percent pushed through by Gov. Martin O'Malley (D), and Virginia Gov. Bob McDonnell (R) pushed through a transportation bill that boosted the combined state and local sales tax in northern Virginia to 6 percent, as of July 1, 2013.

Table: Sales Tax Rates in the District of Columbia, Virginia, and Maryland, 1965-present

Year

D.C. sales tax

Virginia sales tax rate (inc. local tax in Northern Virginia)

Maryland sales tax rate

1965

3%

None

3%

1966

3%

3%

3%

1967

3%

3%

3%

1968

3%

4%

4%

1969

4%

4%

4%

1970

4%

4%

4%

1971

4%

4%

4%

1972

4%

4%

4%

1973

5%

4%

4%

1974

5%

4%

4%

1975

5%

4%

4%

1976

5%

4%

4%

1977

5%

4%

5%

1978

5%

4%

5%

1979

5%

4%

5%

1980

5%

4%

5%

1981

6%

4%

5%

1982

6%

4%

5%

1983

6%

4%

5%

1984

6%

4%

5%

1985

6%

4%

5%

1986

6%

4.5%

5%

1987

6%

4.5%

5%

1988

6%

4.5%

5%

1989

6%

4.5%

5%

1990

6%

4.5%

5%

1991

6%

4.5%

5%

1992

6%

4.5%

5%

1993

6%

4.5%

5%

1994

5.75%

4.5%

5%

1995

5.75%

4.5%

5%

1996

5.75%

4.5%

5%

1997

5.75%

4.5%

5%

1998

5.75%

4.5%

5%

1999

5.75%

4.5%

5%

2000

5.75%

4.5%

5%

2001

5.75%

4.5%

5%

2002

5.75%

4.5%

5%

2003

5.75%

4.5%

5%

2004

5.75%

5%

5%

2005

5.75%

5%

5%

2006

5.75%

5%

5%

2007

5.75%

5%

5%

2008

5.75%

5%

6%

2009

5.75%

5%

6%

2010

6%

5%

6%

2011

6%

5%

6%

2012

6%

5%

6%

2013 (as of Oct. 1)

5.75%

6%

6%

Topics

Related Articles

Ranking Sales Taxes on the 2023 State Business Tax Climate Index

Do Consumption Taxes Do a Better Job of Taxing Criminals?

Insights into the Tax Systems of Scandinavian Countries

America’s Progressive Tax and Transfer System: Federal, State, and Local Tax and Transfer Distributions

Facts & Figures 2023: How Does Your State Compare?

New Mexico’s Omnibus Tax Bill

A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

A recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years.

A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.