Local Sales Taxes Add Significant Burden on Consumers

September 22, 2011

New Study Ranks States by Total Sales Tax Rates

Washington, DC, September 22, 2011 – Local sales taxes—added on top of existing statewide sales taxes—can add significantly to the amount consumers pay for everyday goods, and are frequently less well understood by taxpayers than statewide rates. A new study from the Tax Foundation updates the rates across the country and ranks each state on its combined state and local sales taxes.

“While most attention gets directed to rates that apply statewide, the proliferation of local jurisdictions levying their own sales taxes can have an enormous impact on a state’s overall tax structure.” said Tax Foundation analyst Scott Drenkard. “In some states, local rates can more than double the average sales tax paid by consumers.”

The five highest average local rates are in Louisiana (4.84%), Alabama (4.64%), Colorado (4.58%), New York (4.48%) and Oklahoma (4.16%). The highest single jurisdiction in the U.S. for sales taxes is Tuba City, Arizona, which has a combined rate of 13.725%. This is composed of a 6.6% state tax, a 1.125% Coconino county tax, and an additional 6% tax levied by the local Navajo tribal government.

Mississippi has the lowest non-zero average local rate of 0.003%; attributable entirely to a 2.5% sales tax in the small city of Tupelo, which has a population of 34,546. After Mississippi, the states that round out the lowest five non-zero rates are Idaho (0.02%), New Jersey (0.03%), Vermont (0.14%) and Minnesota (0.30%).

“Fourteen states have no general local option sales tax, but this does not always make for favorable rankings,” said Drenkard. “Indiana, for example, despite having no local general sales taxes, still ranks 21st because of a 7% statewide rate.”

Among states that do collect a statewide tax, the five with the lowest average combined rates are Hawaii (4.35%), Maine (5%), Virginia (5%), Wyoming (5.34%), and Wisconsin (5.43%). The five highest combined rates are Tennessee (9.43%), Arizona (9.12%), Louisiana (8.84%), Washington (8.79%) and Oklahoma (8.66%).

Four states tie for the lowest state and local sales tax rate – Delaware, Montana, New Hampshire and Oregon – none of which tax sales at either the state or local level.

Tax Foundation Fiscal Fact No. 284, “Ranking State and Local Sales Taxes” by Scott Drenkard is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.