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As Q1 has come to a close, now is a good time to think about sales taxes and their rates. In my experience sales taxes are one of the biggest areas where entrepreneurs fail to comply. This non-compliance can come with hefty fines, and in some cases, prison time. States rely heavily on sales tax revenue, responsible for 32% of state tax collections and 13% of local tax collections (~24% combined collections), meaning, they are inclined to pursue any unpaid obligations.
Below is a chart provided by the Tax Foundation that highlights the combined state and average local sales tax rates as of January 2025.
- 45 states collect a statewide sales tax (0.00% to 7.25%) while 38 also have local taxes (with rates ranging from 0.00% to 8.30%)
- 5 states with no state sales tax
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
- 4 states with no state or local sales tax
- Delaware
- New Hampshire
- Oregon
- Montana
- 5 states with the highest combined state & average local rates are :
- Louisiana (10.12%)
- Tennessee (9.61%)
- Arkansas (9.46%)
- Washington (9.51%)
- Alabama (9.46%)
Sales taxes are just one part of an overall tax structure and should be considered in the context with other taxes (income, personal property, real property, transfer, etc.). For example, Tennessee has high sales tax rates, however, no income tax. On the other hand Oregon has no sales tax but a high income tax rate.
Disclaimer: The information provided herein is intended solely for informational purposes and no person(s) or other third-party may rely upon it as financial, tax, or legal advice or use it for any other purposes. As a result, Royal Financial, and any affiliates, assume no responsibility whatsoever to readers, or any other persons for that matter, as a result of the information contained herein.