New York -- California and Indiana have the highest statewide sales taxes in the country, but Tennessee and Arizona take top billing when local sales taxes are added to the calculation, according to a new analysis by the Tax Foundation, a Washington, D.C.-based think tank that monitors fiscal policy at the federal, state and local levels.
“Retail sales taxes are one of the more transparent ways to collect tax revenue, as statewide sales tax rates are generally well-understood by taxpayers,” said Tax Foundation economist Scott Drenkard. “The local sales taxes collected in thousands of jurisdictions in 37 states, however, often are not. These rates can be substantial, so a state with a moderate statewide sales tax rate can end up with a very high combined state and local rate.”
The research group found that the states with the highest combined state-local rates are Tennessee (9.43%), Arizona (9.12%), Louisiana (8.86%), Washington (8.83%), and Oklahoma (8.68%).
Hawaii, Maine, Virginia, Wyoming, and Wisconsin have the lowest combined state and local rates. Delaware, Montana, New Hampshire, and Oregon do not levy sales taxes.
The states with the lowest non-zero combined rates are Alaska (1.79%), Hawaii (4.35%), Maine (5.00%), Virginia (5.00%), and Wyoming (5.18%).
California, despite a 1% reduction in its sales tax rate that took effect July 1, 2011, still has the highest state-level rate at 7.25%. Five states tie for the second-highest statewide rate with 7% each: Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.
The five states with the highest average local sales tax rates are Louisiana (4.86%), Colorado (4.52%), New York (4.48%), Alabama (4.37%), and Oklahoma (4.18%).
Mississippi still claims the lowest non-zero average local rate of 0.004% attributable to the state's only local sales tax: a 0.25% sales tax in Tupelo, the birthplace of Elvis Presley.
Top Five: States with highest combined state-local sales tax rates:
* Source: The Tax Foundation