Sales tax rates vary significantly across the United States, with some states imposing much higher rates than others. According to the Tax Foundation’s 2023 midyear data, the top five states with the highest combined state and average local sales tax rates are:
Key Facts
- The top five states with the highest total sales tax rates (combining state and average local sales tax) as ranked by the Tax Foundation for 2023 are:
- Tennessee (9.548 percent)
- Louisiana (9.547 percent)
- Arkansas (9.44 percent)
- Washington (9.40 percent)
- Alabama (9.24 percent)
- Sales tax rates can differ by state, and some states with moderate statewide sales tax rates can have high combined state and local rates compared to other states.
- Local sales taxes are collected in 38 states, and in some cases, they can rival or even exceed state rates.
Tennessee (9.548%)
Louisiana (9.547%)
Arkansas (9.44%)
Washington (9.40%)
Alabama (9.24%)
Note: These rates represent the average combined state and local sales tax rates, which may vary within each state due to local jurisdictions imposing additional taxes.
Factors Affecting Sales Tax Rates
Several factors can influence sales tax rates, including:
- State revenue needs: States rely on sales tax revenue to fund essential services such as education, healthcare, and infrastructure.
- Local government autonomy: In some states, local governments have the authority to impose their own sales taxes, which can lead to higher combined rates in certain areas.
- Economic conditions: States may adjust sales tax rates to stimulate economic growth or address budget deficits.
Impact of Sales Tax Rates
High sales tax rates can have several implications:
- Increased consumer costs: Consumers bear the burden of sales taxes, which can increase the overall cost of goods and services.
- Reduced economic activity: High sales tax rates can discourage consumer spending, potentially slowing down economic growth.
- Tax avoidance: Consumers may seek to avoid paying sales taxes by shopping in neighboring states with lower rates or making purchases online from out-of-state retailers.
Sources
- State and Local Sales Tax Rates, Midyear 2023
- States with the Highest and Lowest Taxes
- 10 States With the Highest Sales Taxes
FAQs
What is the highest sales tax rate in the United States?
The highest combined state and average local sales tax rate in the United States is 9.548%, found in Tennessee.
Which states have the highest sales tax rates?
The top five states with the highest combined state and local sales tax rates are Tennessee, Louisiana, Arkansas, Washington, and Alabama.
How do sales tax rates differ by state?
Sales tax rates vary significantly by state, ranging from 0% in five states to over 9% in Tennessee. Some states have a single statewide sales tax rate, while others allow local governments to impose additional taxes.
What is the impact of high sales tax rates?
High sales tax rates can increase consumer costs, reduce economic activity, and encourage tax avoidance.
How can I avoid paying high sales tax rates?
You may be able to avoid paying high sales tax rates by shopping in neighboring states with lower rates or making purchases online from out-of-state retailers. However, some states have laws that require consumers to pay use tax on purchases made out of state.
What is the average sales tax rate in the United States?
The average combined state and local sales tax rate in the United States is approximately 7.3%.
Which states have the lowest sales tax rates?
The five states with the lowest combined state and local sales tax rates are Alaska (1.81%), Delaware (0.00%), Montana (0.00%), New Hampshire (0.00%), and Oregon (0.00%).
How often do sales tax rates change?
Sales tax rates can change periodically, typically when state legislatures pass new laws or local governments adjust their tax rates.