Sales tax is added to the price of goods and services and collected from the purchaser. As a business, you must collect and remit the correct sales taxes but cannot control the rates set by state and local governments. City, county, and municipal rates vary.
Highest Sales Tax Rates
The highest state sales tax is 7%, charged by four states: Indiana, Tennessee, Mississippi, and Rhode Island. When average local sales taxes are included, sales tax rates exceed 7% in almost twenty states.
California has the highest state sales tax rate at 7.25%. It relies heavily on sales tax to fund state services like education and healthcare. Additionally, its large consumer base generates significant revenue.
New Jersey has a fairly low sales tax rate but the highest average property tax and third-highest income tax burden.
Tax Variations Across States
Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
When local taxes are added, Colorado has the highest maximum local rate at 8.3%. Tacoma, Washington has the highest local rate nationwide.
Four states—Oregon, New Hampshire, Montana, and Delaware—have a combined sales tax of 0%. Louisiana and Tennessee both have the highest combined sales tax rate of 9.55%.
New Jersey has the highest property tax but a lower sales tax rate. States with higher sales taxes compensate for lower income taxes. Louisiana’s state sales tax rate is 4%, but local taxes can be as high as 7%. The federal government gives states the authority to decide on sales tax policies.
States with No Sales Tax
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Frequently Asked Questions
What 4 states have the highest sales tax?
California has the highest state-level sales tax rate, at 7.25 percent. Four states tie for the second-highest statewide rate, at 7 percent: Indiana, Mississippi, Rhode Island, and Tennessee.
What is the most heavily taxed state?
California has the highest state sales tax rate at 7.25%. When local taxes are added, Colorado has the highest maximum local rate at 8.3%. Louisiana and Tennessee both have the highest combined sales tax rate of 9.55%. New Jersey has the highest property tax but a lower sales tax rate.