State and Local Sales Taxes in 2012

Daily Policy Digest

Tax and Spending Issues

February 21, 2012

State and Local Sales Taxes in 2012

Sales taxes are among the most transparent forms of taxation that a government can levy, and the simplicity of sales taxes allows for state-by-state comparison, says Scott Drenkard, an economist with Tax Foundation.

In a new Tax Foundation analysis, Drenkard gives the population-weighted average of local taxes in each state. This enables him to calculate a combined rate between the state and local sales taxes in order to demonstrate the real burden of sales taxes across the country.

• 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).
• Alaska, Delaware, Montana, New Hampshire and Oregon have the lowest combined rates because they do not have a statewide sales tax and only Alaska has any local sales taxes.
• The single highest combined rate in the United States is in Tuba City, Arizona -- with a 6.6 percent state tax, a 1.125 percent Coconino county tax and a 6 percent tribal tax levied by the To'Nanees'Dizi local government, the locality has a combined rate of 13.725 percent.

Local rates are usually significantly smaller than the statewide rate, meaning that much of the combined rate is determined at the state level.

• 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.
• Among states with a sales tax, Colorado's 2.9 percent rate is the lowest, followed by seven states that all levy a 4 percent tax: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming.

Some states do have an average local tax rate that is a significant contributor to the combined rate.

• The five states with the highest average local sales tax rates are Louisiana (4.85 percent), Colorado (4.54 percent), New York (4.48 percent), Alabama (4.33 percent) and Oklahoma (4.16 percent).
• The highest local rate is 7 percent in Wrangell, Alaska.