The price on the sticker isn't the price you ultimately pay. Every state except Alaska, Delaware, Montana, New Hampshire and Oregon charge a state sales tax that is collected when you purchase certain products and services. States like sales taxes because they are easy to calculate and collect. Because the tax doesn't come with exemptions for certain individuals, it's difficult for consumers to get around paying the tax. Thirty-six states also allow for a local sales tax. In these states, consumers pay a state tax along with a local tax. Because this local tax is substantial in some states, looking at the combined rate is the only way to know the true sales tax rate in a certain community. If you're planning to move in the near future, you might want to dig a little deeper if you're heading to one of these states with high sales taxes.

State Sales Tax Rate: 6.25%
Average Local Sales Tax Rate: 1.95%
Combined Rate: 8.20%

Illinois has one of the most complicated sales tax systems of all states, with more than 1,000 local taxing jurisdictions. Localities can charge as much as 5.25%, and Chicago has the highest combined sales tax of all cities in the United States at 9.6%. Illinois is also one of the few states that require sales taxes be imposed on online purchases even if the retailer has no presence in the state.

State Sales Tax Rate: 6.30%
Average Local Sales Tax Rate: 1.96%
Combined Rate: 8.26%

Kansas has a higher sales tax rate than 79% of all states. In the state capital of Topeka, Kan., businesses collect a county tax of 1.15% and a city rate of 1%. Many states either reduce or eliminate taxes on necessities like drugs, groceries and clothes, but Kansas taxes all purchases at the same rate.

State Sales Tax Rate: 4.00%
Average Local Sales Tax Rate: 4.33%
Combined Rate: 8.33%

Alabama's state rate is a modest 4%, but localities are permitted to charge as much as 10% in taxes. In addition, Alabama doesn't exempt groceries and food from the state sales tax, but it does exempt most prescription drugs.

New York
State Sales Tax Rate: 4.00%
Average Local Sales Tax Rate: 4.48%
Combined Rate: 8.48%

New York allows localities to charge as much as 13.075% in local taxes, with most necessities being exempt from sales tax. New York also exempts college textbooks and clothing items priced under $110.

State Sales Tax Rate: 6.00%
Average Local Sales Tax Rate: 2.58%
Combined Rate: 8.58%

Arkansas allows localities to charge as much as 9.25% in sales tax. The state exempts prescription drugs and imposes a special sales tax rate on necessities like groceries and clothes.

State Sales Tax Rate: 4.50%
Average Local Sales Tax Rate: 4.16%
Combined Rate: 8.66%

Oklahoma has a maximum local tax rate of 8.5%, and doesn't exempt any purchases from its sales tax. Consumers making purchases tax-free, such as purchases online, have to claim those purchases on their state taxes.

State Sales Tax Rate: 6.50%
Average Local Sales Tax Rate: 2.30%
Combined Rate: 8.80%

Although Washington has the fourth highest sales tax rate, it is one of nine states that doesn't have a state income tax. The state exempts purchases of necessities from its state sales tax. Other purchases, like unhealthy food and non-essential pharmaceuticals qualify for a special tax rate.

State Sales Tax Rate: 4.00%
Average Local Sales Tax Rate: 4.85%
Combined Rate: 8.85%

Louisiana allows localities like parishes (equivalent to counties) and cities to charge up to 10% in state taxes. Baton Rouge, La. charges a 5% tax in addition to the 4% state tax rate making the effective tax rate in the city 9%. Louisiana doesn't exempt any purchases from its state sales tax.

State Sales Tax Rate: 6.60%
Average Local Sales Tax Rate: 2.52%
Combined Rate: 9.12%

Arizona calls its sales tax a transaction privilege tax. Some jurisdictions, which are allowed to charge as much as 10.6%, allow the state to collect its taxes while others collect separately. Arizona exempts groceries and prescription drugs from its state sales tax.

State Sales Tax Rate: 7.00%
Average Local Sales Tax Rate: 2.45%
Combined Rate: 9.45%

Tennessee has the highest overall tax rate collecting 80% of its revenue from sales and selective taxes, but charges no state income tax. Like Kansas, Tennessee does not exempt any purchases like drugs or clothes, but the state does charge a reduced sales tax on other items like groceries.

The Bottom Line
When comparing taxes, consider not only sales taxes, but also state income tax rates. States with a low income tax and higher sales tax may represent a better value than others with lower sales tax rates.

Related Articles
  1. Economics

    5 States with the Highest GDP Per Capita

    Learn about the top five states ranked by their real gross domestic product (GDP) per capita as of 2014: Alaska, North Dakota, New York, Connecticut and Wyoming.
  2. Taxes

    Revisiting the Internet Sales Tax Bill: 2013 Vs. 2015

    Learn about the Marketplace Fairness Act of 2015 being reviewed by congress and the differences between it and the 2013 Marketplace Fairness Act.
  3. Budgeting

    Basics For Buying An Apartment In Manhattan

    Here's info to help you get the apartment hunt started right.
  4. Investing Basics

    Internet Sales Tax's Effect on Interstate Commerce

    Find out how a national Internet sales tax could affect interstate commerce, and why some bigger online retailers are lobbying for such a tax.
  5. Savings

    The Worst Financial Problems Ultra-High-Net-Worth-Individuals (UHNWIs) Face

    Understand how the problems of ultra-high-net-worth individuals (UHNWIs) are different from ordinary problems, and identify the unique financial challenges they face.
  6. Retirement

    Americans Are Living Longer, but Social Security Is Not Catching Up

    Find out how Social Security really works, why the system is in trouble and whether retirees are simply living too long for Social Security to remain viable.
  7. Retirement

    How Yearly Taxes on 401(k) Accounts Work

    Learn how your contributions to traditional or Roth 401(k) accounts are taxed, either in the year of contributions or at withdrawal, depending on the type.
  8. Markets

    Hillary Clinton Promises Free College and Higher Wages

    With income inequality on the rise, Hillary Clinton is running on raising the minimum wage, raising middle class wages, and providing free or low-cost college education.
  9. Investing

    Top Tips for Deducting Stock Losses

    Investors who know the rules can turn their losing picks into tax savings. Here's how to deduct your stock losses.
  10. Personal Finance

    Read This Before Taking $10K+ to the Philippines

    There are many reasons why you might need to go to the Philippines with more than $10,000. If you do, follow these guidelines to avoid penalties.
  1. How is residual value of assets taxed?

    Residual value has several meanings, each with its own potential tax consequences. Tax laws vary between jurisdictions, so ... Read Full Answer >>
  2. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  3. Does a Flexible Spending Account (FSA) cover braces?

    Funds from a Flexible Spending Account (FSA) can be used to cover costs associated with installing, maintaining and removing ... Read Full Answer >>
  4. Does QVC charge sales tax?

    QVC, an American TV network, is registered with states to collect sales or use tax on taxable items. QVC is also required ... Read Full Answer >>
  5. Does a Flexible Spending Account (FSA) cover glasses?

    The funds in a Flexible Spending Account (FSA) can be used to cover most common medical expenses; this includes the cost ... Read Full Answer >>
  6. Are tax brackets adjusted for inflation?

    Each year, the U.S. Internal Revenue Service (IRS) adjusts tax brackets for changes in the cost of living to calculate federal ... Read Full Answer >>

You May Also Like

Trading Center