If you’ve ever traveled to Tuba City, Ariz., a Native American enclave about 80 miles north of Flagstaff, you might have noticed the area’s unusually high sales tax. In fact, at a combined state and local rate of 12.7 percent, it’s uniquely high—the highest in the nation—according to a new study of combined state and local tax rates.
Solid-blue California, maybe unsurprisingly, has the highest state sales tax, but factor in average local sales taxes and its rank drops to eight, according to the mid-year study from the nonprofit Tax Foundation. Residents of Tennessee, Arkansas and Louisiana—states that may not immediately come to mind when you think of high taxes—pay the highest average sales tax.
Looking at combined rates is important because it factors in wide variations between state and local sales taxes, says study author Scott Drenkard.
“The perfect example of why you want to do that is Colorado has a 2.9 percent statewide sales tax but their average local rates are in the 4.5 percents,” he says. “So if you look at them on paper and just look at their state rate you’d say ‘wow, that’s a low sales tax rate.’ But it’s not if you account for locals.”
With a relatively low rate of 4 percent, Louisiana ranks 38th based solely on state-level sales taxes. Once local sales taxes are accounted for, however, the state shifts more than any other jumping to the third spot in the combined-rate rankings.
Tennesseans pay an average combined sales tax of 9.4 percent. In Arkansas, the average combined rate is 9.2 percent. Louisiana and Washington have combined rates of 8.9 percent, while Oklahoma ranks fifth, with a combined rate of 8.7 percent. Four states—Delaware, Montana, New Hampshire and Oregon—levy neither state nor local sales taxes.
Of the states that have either a state or local sales tax, Alaskans pay the least: a combined rate of 1.7 percent. Hawaiians pay 4.4 percent, Mainers pay 5 percent, Wisconsinites pay 5.4 percent and the citizens of Wyoming pay 5.5 percent.
California raised its sales tax last November, while Virginia and Arkansas raised rates this July, according to the study. The state sales tax fell in Arizona where a temporary increase expired while Kansas recently cut its rate.
Only three municipalities charge higher local rates than Tuba City: Homer and Seldovia, Alaska, and Snowmass Village, Colo.
Large differences between state and local rates can influence behavior, the report notes. Businesses may set up shop across state lines to take advantage of lower rates and shoppers may leave municipalities that charge high sales taxes for nearby ones that don’t.