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Highest state, local sales taxes

By Kay Bell ·
Thursday, August 19, 2010
Posted: 11 am ET

I'm never moving again. Of course, I don't live in the Alabama cities of Birmingham or Montgomery or anywhere in Tennessee.

Those locales have the highest sales tax rates in the United States.

The one thing that unites most Americans is our opposition to paying the IRS. But for some reason we tend to forget our local taxes. Maybe it's because there are so many state and local levies that we've just become oblivious to them.

And the one that is collected most across the country is the sales tax.

Only Alaska, Delaware, Montana, New Hampshire and Oregon don't collect a state sales tax.

But in Alaska, local jurisdictions can levy a sales tax if they wish; at last count, 62 municipalities do, with rates ranging between 1 percent and 7 percent. Thirty-three states join Alaska in letting localities charge a local option sales tax on top of the state tax rate.

The folks at the Tax Foundation, a Washington, D.C., nonprofit that's been examining tax policy since 1937, have done some number crunching on the various sales taxes assessed in the states and the District of Columbia.

Tennessee's 9.44 percent combined state and average local sales tax rate is the highest in the country. Residents of Birmingham and Montgomery are tied for the highest combined state, county and city sales tax rates among major metropolitan areas at 10 percent.

No wonder both states had recent sales tax holidays!

"General sales tax rates levied by state, county and city governments in the United States vary greatly," notes Tax Foundation adjunct scholar Lawrence Summers (no, he's not the Larry Summers who's in the Obama administration). The Foundation's Summers wrote the report that examined combined state, county and city sales tax rates in cities with populations greater than 200,000. FYI, there are 107 such jurisdictions.

"Even within a state, it can be difficult to know what the average sales tax rate is when there can be hundreds of different jurisdictions charging different rates," says Kail Padgitt, the Tax Foundation economist who looked more closely at local option sales tax rates.

After Tennessee, the states with the highest combined state and average local option sales tax rate are California at 9.08 percent; Arizona at 9.01 percent; Louisiana at 8.69 percent; Washington at 8.61 percent; New York at 8.52 percent; Oklahoma at 8.33 percent; Illinois at 8.22 percent; Arkansas at 8.10 percent; and Alabama at 8.03 percent.

Joining Birmingham, Ala., and Montgomery, Ala., with their 10 percent combined sales tax rate each, on the heavily sales taxed resident list are the California cities of Long Beach, Los Angeles, Oakland, and Fremont, which each have a combined sales tax rate of 9.75 percent.  That's also the combined rate assessed in Chicago.

So if sales taxes matter to you, where do you want to live? In addition to the five no-sales-tax states, the lowest levies on purchases are in Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent), Wyoming (5.17 percent) and South Dakota (5.22 percent).

And remember, if you get a job in one of these low-sales-tax states, you can deduct your move on your federal tax return!

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October 17, 2010 at 9:17 am

The article and list put Seattle in 4th??? They should have updated their information. Sales tax on a 100.00 purchase in Seattle cost 9.5% if it is dining then that jumps to 10.0%

Seattle should have topped the list, cheers to good journalism.

October 12, 2010 at 10:46 pm

TN may have the highest sales tax. However, after living in a place like Philly where you are taxed each year just to work in the state of PA. Then you have a state income tax, a bourgh tax, city tax, county tax, and whatever else they can think of, I think paying my little ole sales tax is nothing.

Jim Frank
October 12, 2010 at 8:50 pm

Don't move to Seattle Washington. We have one of the highest sales tax rates and will pass a large income tax in November. 5 generations and I am moving.

October 12, 2010 at 5:52 pm

As mentioned, states like TN have no income tax. Same with WA, FL, and others. In fact, having a higher sales and consumption tax is a much fairer way to distribute the burden, rather than taking the typical "soak the highest wage earners" tack that many states and the feds take.

With a sales tax, commuters, tourists, and visitors, as well as residents share in the burden and income is not a discriminating factor. Everyone pays based on how much they consume. Much fairer system.

Kay Bell
August 20, 2010 at 2:33 pm

You're right, Paul. The tax man will always find a way to get you. I've lived in a relatively high income tax state, Maryland, and in two states with no income taxes. Here in Texas, property taxes eat our lunches! But sales taxes are notable because they tend to be regressive. While the same rate is charge to every consumer, wealthier folks can absorb a 5, 7 or 10 percent sales tax more easily than can a poorer purchaser. That's why sales taxes tend to get a lot of attention, from taxpayers and the folks who examine tax trends.

August 20, 2010 at 2:27 pm

Don't be short sighted- there's more to taxes than sales tax rates. A place might have high sales tax, but no state income tax and low property taxes- that's the case in Tenn. Hawaii has low sales taxes but super high property taxes and a decent state income tax. States need revenue- and if they don't have income tax, they'll raise the money in other ways.