24/7 Wall St. recently determined the states with the highest and lowest sales tax by studying data collected in 2017 by the Tax Foundation. The ranking was generated based on the average of local sales tax rates and the sum of the statewide sales tax rate.
There are 5 states in the U.S. that do not levy statewide sales tax, and 12 that do not collect local sales taxes. States that do not impose sales tax on either level include Delaware, Montana, New Hampshire and Oregon.
Where are the Lowest Sales Taxes in the US?
- Alaska (1.76 percent)
- Hawaii (4.44 percent)
- Wyoming (5.33 percent)
- Wisconsin (5.43 percent)
- Maine (5.50 percent)
Where are the Highest Sales Taxes in the US?
- Tennessee (9.55 percent)
- Louisiana (9.52 percent)
- Arkansas (9.51 percent)
- Washington (9.23 percent)
- Alabama (9.22 percent)
While many states balance revenue between different types of taxes such as income, sales, and property taxes, other states opt out of one or more types of taxation entirely. For example, in Oregon where there is no sales tax is imposed, approximately 41% of state and local collections come from income tax. This is the highest share of tax revenue from income tax in any state. On the other hand, the state of Washington does not collect income tax, and holds the fifth highest combined sales tax rate in the country.
Many states struggle to determine whether to levy sales or income tax. According to 24/7 Wall St., “Just over half of states earn more revenue from income than sales tax. Income tax allows for a higher share of revenue to come from affluent residents. A high sales tax disproportionately affects poor residents, as they pay a higher share of their income in sales taxes than wealthier residents.”
Where does your state rank on the list? Learn about each state's sales tax.