Five States With The Highest Average Combined State And Local Sales Tax Rates – Five States With The Lowest

Highest State Tax Rates- Lowest State Tax Rates

We always enjoy the outstanding research conducted by the Tax Foundation. We wanted to know the states with the highest state and local and sales and use tax rates. Before you start packing up all your personal belongings and move to another lower tax state, it is a good idea to do your research first. According to the research conducted by the Tax Foundation, the five states with the highest average combined state and local sales tax rates are Louisiana (9.56 percent), Tennessee (9.55 percent), Arkansas (9.45 percent), Washington (9.38 percent), and Alabama (9.29 percent). The five states with the lowest average combined rates are Alaska (1.82 percent), Hawaii (4.50 percent), Wyoming (5.44 percent), Maine (5.50 percent), and Wisconsin (5.70 percent). Five states forego statewide sales taxes: Alaska, DelawareMontanaNew Hampshire, and Oregon. Of these, only Alaska allows localities to impose local sales taxes.

Alaska is looking pretty good, even during the winter, with their combined state and local and sales tax rates. You may want to investigate the utility rates though as I have no idea of the rates.

According to the Tax Foundation, California has the highest state-level sales tax rate, at 7.25 percent.[2] Four states tie for the second-highest statewide rate, at 7 percent: IndianaMississippiRhode Island, and Tennessee. The lowest non-zero state-level sales tax is in Colorado, which has a rate of 2.9 percent. Five states follow with 4 percent rates: Alabama, Georgia, Hawaii, New York, and Wyoming.[3]

No state rates have changed since South Dakota cut its state sales tax rate in 2023, a reduction set to expire after 2026. The Mount Rushmore State follows on the heels of New Mexico, which lowered the rate of its state-level sales tax—a hybrid tax the state refers to as its gross receipts tax—from 5.125 percent to 5 percent in July 2022. Notably, if the revenue from the gross receipts tax in any single fiscal year from 2026 to 2029 is less than 95 percent of the previous year’s revenue, then the state’s rate will return to 5.125 percent on the following July 1.

Before that, the most recent statewide rate reduction was Louisiana’s cut, from 5.0 to 4.45 percent, in July 2018. State lawmakers have instead prioritized income tax cuts, which yield more economic benefit, reducing individual or corporate income tax rates (or both) in more than two dozen states in the past two years alone.

For all 50 State Tax Rates, go to the Tax Foundation Link at https://taxfoundation.org/data/all/state/2024-sales-taxes/  to download an accurate chart for 2024.

Thank you Tax Foundation Team with special mention to writer Jared Walczak, VP State Projects.

TaxConnections Admin

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