State and Local Sales Tax Rates, Midyear 2015

Key Findings

• Forty-five states and the District of Columbia collect statewide sales taxes.
• Local sales taxes are collected in thirty-eight states.
• The five states with the highest average combined state and local sales tax rates are Tennessee (9.46 percent), Arkansas (9.27 percent), Louisiana (9.01 percent), Alabama (8.93 percent), and Washington (8.90 percent).
• Sales tax rates differ by state, but sales tax bases also impact how much revenue is collected from a tax and how the tax affects the economy.
• Differences in sales tax rates cause consumers to shop across borders or buy products online.

Introduction

Retail sales taxes are one of the more transparent ways to collect tax revenue. While graduated income tax rates and brackets are complex and confusing to many taxpayers, sales taxes are easier to understand; consumers can reach into their pockets and see the rate printed on receipts.

In addition to state-level sales taxes, consumers face local-level sales taxes in 38 states as well. These rates can be substantial, so a state with a moderate statewide sales tax rate could actually have a very high combined state and local rate compared to other states. This report provides a population-weighted average of local sales taxes as of July 1, 2015 in an attempt to give a sense of the statutory local rate for each state. See Table 1 at the end of this Fiscal Fact for the full state-by-state listing of state and local sales tax rates.