Vertex, a company that provides sales taxA 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. data, released its 2010 Sales Tax Report (PDF) last month, finding:
[T]he average combined U.S. sales and use taxA 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. rate increased to a record high of 9.64 percent compared to the previous record of 8.63 percent in 2009. Additionally, the average combined rate of 9.64 percent marks the highest average since Vertex started tracking the data in 1982.
The report valuably tracks new taxing jurisdictions and changes within existing ones: far from reducing the burdensome number of sales tax jurisdictions, there were 273 new ones created in 2010. Altogether, new and changed sales taxes have been running at about 676 per year.
Interestingly, Vertex reports that the highest combined sales tax in the United States is 13.725%, in Tuba City, Arizona (pop. ~8,000), near the To’Nanees’Dizi Local Government (Navajo). Arizona does impose a 6.6% state tax, the county has a 1.125% tax, and tribal merchants collect a 6% sales tax. However, my guess was that retailers either charge the state/county tax (7.725%) or the tribal tax (6%), but not both, given that state tax law doesn’t usually extend to tribal reservations. I contacted Vertex and they referred me to Tax Ruling 95-11 (PDF), which specifies that Arizona’s sales tax is collected on the reservation only if it involves a sale by a non-tribal retailer to a non-tribal consumer.
A few Tax Foundation interns called around to local businesses in the Tuba City area (including restaurants on reservation land), and all reported charging a 6% sales tax. (A local hotel quoted a 14% hotel tax rate, but hotel taxes are usually higher than sales taxes.) My conclusion is that Tuba City probably does have the highest rate on the books, but that no one actually pays it.
Previously we had reported that the highest combined sales tax was in Alabama:
The dubious distinction of having the highest combined sales tax goes to four localities in central Alabama. Brookwood, Coaling, Coker and Vance have a total sales tax of 11 percent. Individuals making purchases in any of these municipalities owe 4 percent to the State of Alabama, 5 percent to Tuscaloosa County, and finally 2 percent to the city.
Chicago and Los Angeles, which have lots of sales, stand at 9.75%.
But if you know of a Tuba City merchant that charges 13.725%, let me know!
For average state-local sales taxes by state, see here.
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