Sales taxes in Washington, we know, are a primary revenue source for state government and a significant revenue contributor to many local governments. As the Tax Foundation map above shows (and, yes, we’re partial to these maps), Washington’s average combined state and local sales tax rate ranks 4th in the nation.
TheTax Foundation reports Washington’s 6.5 percent state rate ranks 9th, nationally. A relatively high average local rate of 2.67 percent lifts the combined rate ranking to No. 4. But there are states with significantly higher local sales taxes:
The five states with the highest average local sales tax rates are Alabama (5.14 percent), Louisiana (5.00 percent), Colorado (4.73 percent), New York (4.49 percent), and Oklahoma (4.42 percent).
The top state rates are:
California has the highest state-level sales tax rate, at 7.25 percent. Four states tie for the second-highest statewide rate, at 7 percent: Indiana, Mississippi, Rhode Island, and Tennessee.
TF analyst Janelle Cammenga writes,
Retail sales taxes are one of the more transparent ways to collect tax revenue. While graduated income tax rates and brackets are complex and confusing to many taxpayers, sales taxes are easier to understand; consumers can see their tax burden printed directly on their receipts.
She offers some conclusions:
Avoidance of sales tax is most likely to occur in areas where there is a significant difference between two jurisdictions’ rates. 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…
At the statewide level, businesses sometimes locate just outside the borders of high sales-tax areas to avoid being subjected to their rates. ..
State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate.