Sales Tax By State

Sales tax, acting as a crucial revenue source for states, plays a vital role in shaping a state’s economic health while directly impacting consumers' cost of living. In the United States, each state has the autonomy to set its sales tax rate, leading to a broad range of sales tax rates across the nation.

• The sales tax rates across states vary significantly, with California, at 7.3%, holding the highest sales tax rate. The majority of states have rates between 4% and 7%. On the other end of the spectrum, five states— Oregon, New Hampshire, Montana, Delaware, and Alaska— impose a sales tax of 0%.
• A little less than two-thirds of states (32) have a sales tax rate above the national average of 5.1%, while a little more than a third (18) fall below this average. This pattern suggests that the states with a 0% sales tax considerably bring down the average.
• The correlation between the population of a state and its sales tax rate is not uniform. For instance, California, the state with the highest tax rate, also has the biggest population, while states with zero tax rates, such as Alaska and Montana, have smaller populations. However, populous states like New York and Florida have a moderate sales tax rate of 4.0% and 6.0%, respectively.
• In terms of local sales taxes, two states, Alabama and Louisiana, have an average local sales tax higher than their respective state tax. Interestingly, even though Alaska has no state sales tax, the state’s average local sales tax stands at 1.76%.
• Combining state and local sales taxes gives an overarching view of the tax burden on consumers. The combined sales taxes range from 0% to a high of 9.55%. Approximately thirty-one states fall above the average combined sales tax of 6.44% and nineteen lie below it.