Across the United States, a labyrinthine network of state-imposed tax laws pervades every retail purchase and specific services. Since these state sales tax laws are not federally regulated, each state wields the power to set its base sales tax, creating an intricate system of extra charges and levies for retail consumers.
For example, on top of the 4% state sales tax in the Empire State, New York City tacks on more taxes, making the total scale up to 8.875%. Sales taxes aren’t the be-all and end-all either. Local, county authorities or municipalities can also introduce excise or supplementary taxes.
By 2023, Alaska, Delaware, Montana, New Hampshire, and Oregon stand apart as the five states that impose no sales tax whatsoever at the state level. However, they’re not entirely exempt from taxes, each one boasts its unique mix of municipality-specific taxes.
While Alaska charges no state sales tax, local governments call the shots, slapping charges on selected goods and services. For instance, in Juneau, the tax stands at 5%, though Anchorage and Fairbanks are exceptions with no sales tax. The statewide average tax rate is a mere 1.76%.
Delaware resorts to specific business gross receipts tax. The Blue Hen State resorts to flat-rate per gallon excise taxes on alcohol and motor fuels. While sporting zero state sales tax and property tax, it does levy additional taxes on chosen goods and services distributors, with relatively high corporate income taxes.
Meanwhile, the Golden State of California holds the dubious distinction of the highest tax-imposing state in the country. Not to be outdone, Puerto Rico, technically a non-state territory, levies a whopping 11.5% sales tax.
Tourist hotspots of Montana, though excluding a state sales tax, levy up to 3% resort and local option taxes for frequently toured infrastructural support. For this tax, the city in question must have a population under 5,500, including popular attractions like Whitefish, Red Lodge, Big Sky, and West Yellowstone.
New Hampshire skips a state sales tax but implements an 8.5% meals and rentals tax. This tax stands for restaurant-prepared meals, short-term room rentals, and car rentals. The Granite State introduces a 10% timber tax when cutting, excluding personal use operations.
Oregon also imposes city-based taxes. Although the state sales tax remains at zero, each municipality targets specific goods like tobacco and prepackaged alcoholic beverages with their tax. Some even introduce sales taxes like Ashland’s 5% tax on prepared foods. The Beaver State displays a higher personal income tax than other states but refrains from taxing intangible possessions such as stock accounts and bonds.
An intricate tapestry of tax laws exists between the five zero-sales-tax states - Alaska, Delaware, Montana, New Hampshire, and Oregon. States show an array of tax leniencies, from exemption sales tax to income tax. For instance, Delaware boasts a nil sales tax and takes the seventh spot in the country list of the lowest median property tax rates. Alaska’s state sales tax also stands at zero, however, Juneau levies a 5% local sales tax. Remarkably, Alaska ditches an income tax altogether throughout the state.
Widening the scale, Wyoming offers low sales tax, property tax, and ditches the income tax entirely, earning a spot as one of America's most tax-lenient states. At the other end of the spectrum, California, with its 7.25% tax, is the highest sales tax state in the nation. Indiana, Mississippi, Rhode Island, and Tennessee trail closely, all with 7% sales tax rates. On the other hand, states jumping the bracket of 2% to 5% sales tax include Alabama (4%), Colorado (2.9%), Georgia (4%), Hawaii (4%), Louisiana (4.45%), Missouri (4.23%), New York (4%), North Carolina (4.75%), Oklahoma (4.5%), South Dakota (4.5%), and Wyoming (4%).
On a total of 45 US states, statewide sale taxes are applicable, while 38 states entertain local sales taxes. States that combine state and local taxes amounting to the highest include Alabama (9.25%), Arkansas (9.46%), Louisiana (9.55%), Tennessee (9.55%), and Oklahoma (8.98%).
The lack of state tax regulation leaves tax laws up to each state's discretion, leading to vast differences in sales tax rates from places like New York and California to Delaware, Montana, and New Hampshire. As a result, whether you're paying or avoiding sales tax has a significant effect on your personal finances.
Remember, sales taxes fund key services like education and infrastructure. So, opting to live in a state with a low sales tax rate might indicate that revenue will likely be sourced from other forms of tax.