Few topics are as hotly contested as taxes.
Much of the attention is on paying income taxes, largely overshadowing the most common method of taxation: sales tax. But depending on where you live or do your shopping, your sales tax rate can vary drastically, from zero to over 12%.
That’s because our current sales tax system is a patchwork apparatus with tax rates differing widely by state — and with several states collecting no sales tax whatsoever. States often heavily rely on revenue generated from sales tax, and some localities levy additional sales tax on top of the state rate, which can further jack up the ultimate price consumers pay at the checkout counter.
For example, in Gillham, Arkansas, residents pay 6.125% in local sales taxes on top of their state's 6.5% rate — for a grand total sales tax rate of 12.625%, the highest in the country.
Here’s a look at the states with the highest and lowest sales tax rates in 2023, according to an analysis from the Tax Foundation. (Money also has a map showing sales tax rates in every state.) Bear in mind that the sales tax you ultimately pay on purchases can be higher than the state-level rates listed below if there are local taxes tacked on.
States with the highest sales tax
- California: 7.25% sales tax rate
- Indiana: 7% sales tax rate
- Mississippi: 7% sales tax rate
- Rhode Island 7% sales tax rate
- Tennessee: 7% sales tax rate
- Minnesota: 6.875% sales tax rate
- Nevada: 6.85% sales tax rate
- New Jersey: 6.625% sales tax rate
- Arkansas: 6.50% sales tax rate
- Kansas: 6.50% sales tax rate
States with the lowest sales tax
- Georgia: 4% sales tax rate
- Hawaii 4% sales tax rate
- New York: 4% sales tax rate
- Wyoming: 4% sales tax rate
- Colorado: 2.9% sales tax rate
- Alaska: no sales tax
- Delaware: no sales tax
- Montana: no sales taxes
- New Hampshire: no sales tax
- Oregon: no sales tax
What the experts say
Sales tax is what’s known as a “regressive tax” because research shows that it disproportionately burdens lower-income earners. According to the left-leaning Economic Policy Institute, regressive taxes increase inequality.
- “Sales taxes are levied on what people buy, as opposed to what they earn,” an EPI report states. “Since poor and middle-income families have to spend more of what they earn just to get by, they are paying a greater share of their income in sales taxes. That’s what we mean when we say sales taxes are regressive.”
The drastic difference in sales tax rates among states means that some folks have to pay hefty taxes on the goods they buy at the store, while folks a few miles away in a neighboring state may pay no sales tax at all. These differences spur some consumers to avoid sales tax by trekking to an area that offers a lower rate.
- In New Jersey, for example, the sales tax rate is 6.625% while the rate in neighboring Delaware is zero.
- “Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs,” the Tax Foundation report states.