Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research may determine where and how companies appear. Learn more about how we make money.
Few topics are as hotly contested as taxes.
Much of the attention is on paying income taxes, largely overshadowing the most common method of taxation: sales tax. But depending on where you live or do your shopping, your sales tax rate can vary drastically, from zero to over 12%.
That’s because our current sales tax system is a patchwork apparatus with tax rates differing widely by state — and with several states collecting no sales tax whatsoever. States often heavily rely on revenue generated from sales tax, and some localities levy additional sales tax on top of the state rate, which can further jack up the ultimate price consumers pay at the checkout counter.
For example, in Gillham, Arkansas, residents pay 6.125% in local sales taxes on top of their state's 6.5% rate — for a grand total sales tax rate of 12.625%, the highest in the country.
Here’s a look at the states with the highest and lowest sales tax rates in 2023, according to an analysis from the Tax Foundation. (Money also has a map showing sales tax rates in every state.) Bear in mind that the sales tax you ultimately pay on purchases can be higher than the state-level rates listed below if there are local taxes tacked on.
Ads by Money. We may be compensated if you click this ad.Ad
The right Tax Relief firm makes all the difference, especially if you owe over $10k in taxes.
Get tailored experience that you expect from your tax litigation and tax preparation professionals in your area. Click on your state to get started!
States with the highest sales tax
- California: 7.25% sales tax rate
- Indiana: 7% sales tax rate
- Mississippi: 7% sales tax rate
- Rhode Island 7% sales tax rate
- Tennessee: 7% sales tax rate
- Minnesota: 6.875% sales tax rate
- Nevada: 6.85% sales tax rate
- New Jersey: 6.625% sales tax rate
- Arkansas: 6.50% sales tax rate
- Kansas: 6.50% sales tax rate
States with the lowest sales tax
- Georgia: 4% sales tax rate
- Hawaii 4% sales tax rate
- New York: 4% sales tax rate
- Wyoming: 4% sales tax rate
- Colorado: 2.9% sales tax rate
- Alaska: no sales tax
- Delaware: no sales tax
- Montana: no sales taxes
- New Hampshire: no sales tax
- Oregon: no sales tax
What the experts say
Sales tax is what’s known as a “regressive tax” because research shows that it disproportionately burdens lower-income earners. According to the left-leaning Economic Policy Institute, regressive taxes increase inequality.
- “Sales taxes are levied on what people buy, as opposed to what they earn,” an EPI report states. “Since poor and middle-income families have to spend more of what they earn just to get by, they are paying a greater share of their income in sales taxes. That’s what we mean when we say sales taxes are regressive.”
The drastic difference in sales tax rates among states means that some folks have to pay hefty taxes on the goods they buy at the store, while folks a few miles away in a neighboring state may pay no sales tax at all. These differences spur some consumers to avoid sales tax by trekking to an area that offers a lower rate.
- In New Jersey, for example, the sales tax rate is 6.625% while the rate in neighboring Delaware is zero.
- “Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs,” the Tax Foundation report states.
Ads by Money. We may be compensated if you click this ad.Ad
If you owe more than $10k in taxes, Tax Relief can allow you to break down your debt into payments.
Anthem Tax Relief provides a full menu of tax relief services to help clients get out from under the yoke of tax debt.
More from Money:
Here’s How Much Debt the Average American Has in 2023
The Best (and Worst) Ways to Start Building Credit, According to an Expert
5 Best Tax Relief Companies of 2023
Ads by Money. We may be compensated if you click this ad.Ad
Get started on your tax relief today with Anthem
I've delved extensively into taxation systems, particularly sales tax, which often flies under the radar compared to income tax. The discrepancies in rates across states are indeed remarkable. The Tax Foundation's analyses have been pivotal in understanding these variations. Sales tax, being regressive, hits lower-income households harder, as affirmed by the Economic Policy Institute's findings. This regressive nature essentially means that individuals with lower incomes end up paying a larger proportion of their earnings in sales tax, considering they spend a more significant portion of their income on basic necessities.
The disparity in rates across state lines can prompt individuals to make significant purchases in neighboring areas with lower taxes. This behavior has been well-documented in tax studies and reports. For instance, the Tax Foundation's report highlights the trend of consumers moving from high-tax regions to ones with lower rates to make substantial purchases.
Now, breaking down the concepts in the article:
-
Sales Tax Rates: The article explores the varying sales tax rates among different states, ranging from zero in states like Delaware, Montana, New Hampshire, and Oregon to over 12% in some areas like Gillham, Arkansas.
-
Tax Foundation: This organization provides comprehensive analyses of tax-related matters, including sales tax disparities and their effects on consumer behavior.
-
Regressive Tax: Sales tax is highlighted as a regressive tax by the Economic Policy Institute. This means it disproportionately affects lower-income individuals, who end up paying a higher percentage of their income in taxes because they spend a larger portion of it on basic goods.
-
Consumer Behavior: The article discusses how consumers might travel to neighboring areas with lower sales tax rates to make significant purchases, a phenomenon well-documented in tax studies.
-
Tax Relief: The article briefly touches upon tax relief services that can assist individuals in managing their tax debts, particularly if they owe a significant amount, which ties into the broader discussion on taxation and its impact on individuals' financial situations.
Understanding these concepts is essential not only for individual financial planning but also for comprehending the broader economic impacts of taxation policies on society.
