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IDC Marketscape Report positions TaxJar as a 'Leader' in sales tax automation
Although sales tax rates vary by exact location (and are constantly changing), here are the cities with the highest combined state and local sales tax rate today:
- Gould, Arkansas: 11.5%
- Chicago, Illinois: 10.25%
- Long Beach, California: 10.25%
- Glendale, California: 10.25%
- Seattle, Washington: 10.1%
- Tacoma, Washington: 10.2%
- Birmingham and Montgomery, Alabama: 10%
- Baton Rouge, Louisiana: 9.95%
- Los Angeles, California: 9.5%
- New Orleans, Louisiana: 9.45%
- Nashville, Tennessee: 9.25%
- San Jose, California: 9.25%
What is a combined state and local sales tax rate? In addition to the state sales tax rate, counties and jurisdictions can enforce their own local sales tax rates. So when you look at a combined sales tax rate, you’re looking at the state sales tax rate plus the local sales tax rates from the county and city.
A small group of states have kept sales tax simple. They only require sellers to charge a flat state tax rate. That means no worrying about adding any local rates. Which states are these? We have your list here.
What makes up a sales tax rate anyway?
A lot of factors go into the sales tax rates you charge customers. Firstly, there are state rates. With a few exceptions (which we’ll discuss in a bit), each state with a sales tax has a flat statewide sales tax rate. These rates vary widely from 4-7%.
Next there are local/city/jurisdiction sales tax rates. There are taxes enforced by local areas like your county, city, or jurisdiction. You’ve most likely voted on a local sales tax rate change on a ballot at some point, if there was a specific publicly-funded venture your local government was embarking on. For example, a new park, highway, county hospital. However, not every state has local sales tax rates and we’ll get into that in a minute.
If your mind is whirling a bit by now, we understand. All of these taxes combined gives the U.S. more than 14,000 different sales tax districts.
Which states have the highest sales tax rates?
So where are the highest state sales tax rates? Head West to California. California has the highest sales tax rate of any state at 7.25 percent. As we’ve already talked about, California also houses cities with high sales tax rates, making the combined sales tax rates in cities in the Golden State some of the highest in the nation.There are a few states that tie for the second highest sales tax rate at 7 percent: Indiana, Mississippi, Rhode Island, and Tennessee.
Wondering which states have the lowest sales tax rate? While there are four states that do not have sales tax, the state with the lowest rate that is not zero is Colorado at 2.9 percent. Following that, there are five states that have the next lowest rate of 4 percent: Alabama, Georgia, Hawaii, New York, and Wyoming. However, that likely means higher income and property taxes in these states. States use tax revenue to fund a variety of programs such as schools, infrastructure repairs, community outreach. In order for those essential programs to continue to operate, the state needs funding. So if you are lucky enough to have a low sales tax rate in your state, you probably have higher tax rates in other areas. It’s all about balance!
How TaxJar can help
Here at TaxJar, we live and breathe helping online sellers handle sales tax compliance. While working with customers over the years, we’ve seen a lot of different scenarios. One thing we are often reminded of is that no one sales tax experience is the same. That’s because sales tax rates are made up of a few different factors that vary from seller to seller.
Which state, county, and city you live in makes a big difference. Your fellow online seller two blocks over could sell the exact same product on the exact same platform, but if they operate in a different county than you, they will likely charge a different sales tax rate than you. That’s one of the reasons sales tax compliance is a detail-oriented process!
As they often say in real estate, it’s all about location, location, location.Certain cities and states have higher sales tax rates than others. So the exact location where you do business will have a big impact on whether you’ll remit on the higher or lower end of the sales tax spectrum. Being precise about business location is the reason TaxJar uses what’s called “roof top” calculation for sales tax, so the exact address corresponds to the right rate.
One of the most complicated things about sales tax is determining which rate to charge. At TaxJar, we strive to make this simple with tools like our Sales Tax Calculator. Don’t want to keep up with differing sales tax rates? Let TaxJar automate your sales tax management for you, using roof-top accurate reporting and AI tools. Start your free trial today!