- Days left

Sales Taxes Hit Record High - Which States Take the Biggest Bite?

As states seek more income, sales taxes reach a record highIf you feel like the cost of everything is more expensive at the register these days, it's not your imagination. Even when the cost of goods and services has remained relatively flat, the associated sales and use taxes have continued to climb. Data released recently from Vertex, a privately-held company based in Berwyn, Pa., indicates that although the rates are slowing, they're still increasing: The average combined U.S. sales and use tax rate hit a new record 9.64% last year.

Three states had a rate increase: Arizona, Kansas and New Mexico. Even with those increases, those states still lagged behind the states at the top. California reported the highest sales tax rate at a whopping 7.25%. Indiana, Mississippi, New Jersey, Rhode Island and Tennessee all tied for the second highest sales tax rates at 7.0%.Individually, Wrangell, Alaska, has the highest city sales tax rate in the nation at 7.0%. Other Alaskan cities tie for second place: Kodiak, Hoonah, Dillingham, Cordova, Buckland, Bethel, Petersburg, Kotzebue and Thorne Bay have the second highest city sales tax rate of 6.0%. Luckily for folks in Alaska, there's not a separate sales tax imposed on top of that. It's one of a handful of states (Delaware, Montana, New Hampshire and Oregon are the others) that don't impose a state sales tax on most goods and services.

If you combine city and state sales taxes, Chicago and Los Angeles come out on top. Shoppers in those cities pay 9.75% in tax. Not far behind are San Francisco and Seattle with combined city and state sales tax rates of 9.5%; Phoenix at 9.3%; New Orleans at 9.0%; New York at 8.875%; Dallas, Houston and Charlotte at 8.25%; Las Vegas at 8.1%; and Philadelphia and parts of Atlanta at 8.0%.



Of course, it's not just big cities paying out big taxes. Tuba City (including the surrounding areas that are in the To'Nanees'Dizi Local Government), located in Coconino County, Ariz., has the highest combined total sales tax rate with an amazing 13.7250%.

Sales taxes tend to be a quick -- and administratively easy -- way for states, cities and districts to collect revenue. It's not surprising, then, that since 2003, there have been 1,934 new sales and use taxes, an average of 242 per year. Taken together with changes, the combined number of new and changed sales and use tax rates since 2003 is 5,407, an average of 676 per year.

Proponents of using sales tax as a revenue raiser argue that it's a fair tax since it's a flat rate on purchases -- you pay tax on what you buy. However, opponents argue that sales tax is regressive since those at the lower end of the earnings scale pay a larger percentage of their income in sales tax than those at the top, even for necessities.

Fair or not, states, cities and districts will likely continue to use the sales tax -- perhaps even on online sales -- as a way to plug holes in the budget. The bigger question, then, isn't whether those rates will continue to rise but how high they'll go.


Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

TurboTax Articles

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Video: How to Claim the Affordable Care Act Premium Tax Credit (Obamacare)

The Affordable Care Act Premium Tax Credit is a new refundable tax credit that can lower your monthly health insurance premiums. If you qualify for the tax credit, you can claim the Premium Tax Credit throughout the year to lower your monthly health insurance premiums, or claim the credit with your tax return to either lower your overall tax bill or increase your tax refund.

Deducting Summer Camps and Daycare with the Child and Dependent Care Credit

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

What Is Schedule H: Household Employment Taxes

If you hire people to do work around your house on a regular basis, they might be considered household employees. Being an employer comes with some responsibilities for paying and reporting employment taxes, which includes filing a Schedule H with your federal tax return. But even if you have household employees, filing Schedule H is required only if the total wages you pay them is more than certain threshold amounts specified by federal tax law.

Add a Comment

*0 / 3000 Character Maximum