Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

Photo Collage of a United States of America Map, with tags on top, presenting different Sale Tax percentages
Money; Getty Images

Few topics are as hotly contested as taxes. A national sales tax bill dubbed the Fair Tax Act, which was introduced to the House of Representatives last month, has added fuel to the debate.

In short, the act proposes a complete overhaul of our federal tax system by implementing a national sales tax of approximately 30% in lieu of all other forms of federal taxes. The act would also abolish the IRS. The bill is popular among certain factions of the Republican Party, but does not have broad support in the House and is unlikely to pass the Senate. President Joe Biden said he would veto the bill if it manages to pass both chambers.

Still, the proposal has renewed focus on our current sales tax system, which is a patchwork apparatus with tax rates varying widely by state — and with several states collecting no sales tax whatsoever. States often heavily rely on revenue generated from sales tax, and if the Fair Tax Act were to be enacted, it's likely that residents in those states would be paying state-level sales tax on top of the 30% national rate.

Currently, 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%.

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. Bear in mind that the sales tax you pay on purchases can be higher than the rates listed below if there are local taxes tacked on to the state tax.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
The right Tax Relief firm makes all the difference, especially if you owe over $10k in taxes.
Get tailored experience that you expect from your tax litigation and tax preparation professionals in your area. Click on your state to get started!
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
Get Started

States with the highest sales tax

  1. California: 7.25% sales tax rate
  2. Indiana: 7% sales tax rate
  3. Mississippi: 7% sales tax rate
  4. Rhode Island 7% sales tax rate
  5. Tennessee: 7% sales tax rate
  6. Minnesota: 6.875% sales tax rate
  7. Nevada: 6.85% sales tax rate
  8. New Jersey: 6.625% sales tax rate
  9. Arkansas: 6.50% sales tax rate
  10. Kansas: 6.50% sales tax rate

States with the lowest sales tax

  1. Georgia: 4% sales tax rate
  2. Hawaii 4% sales tax rate
  3. New York: 4% sales tax rate
  4. Wyoming: 4% sales tax rate
  5. Colorado: 2.9% sales tax rate
  6. Alaska: no sales tax
  7. Delaware: no sales tax
  8. Montana: no sales taxes
  9. New Hampshire: no sales tax
  10. Oregon: no sales tax
Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
If you owe more than $10k in taxes, Tax Relief can allow you to break down your debt into payments.
Anthem Tax Relief provides a full menu of tax relief services to help clients get out from under the yoke of tax debt.
Get Started

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.
Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
Take the first step toward better credit today
Lexington Law leverages its three decades of industry experience to work on your behalf. Don’t let bad credit weigh you down. Click below and get started now.
View Plans

More from Money:

The Best Places to Live in Every Region

How to File Your Taxes for Free in 2023

Here's How Biden's Billionaire Tax Would Work