Running your business in one state is simple: considering the filing of sales tax at the end of a fiscal year. But it becomes challenging when you want to expand your business beyond the boundaries of your states to the nearer and further ones around you. Different states in the USA have separate sales tax rates, which may require more work for beginners to manage and calculate efficiently. However, as you are not ready to stop your business expansion for fear or confusion of tax billing, it is wiser to know the different tax ratios in various states of the USA. Here are the top 10 states with the highest sales tax rates in the USA. Please review them to decide where to expand and operate your business.
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Louisiana
Louisiana is the state that levy the highest combined sales tax from its citizens and business operators. The statewide sales tax rate here is 4.45%, and the local sales tax adds up to 5.115%. Therefore, the combined sales tax ratio of this state of the USA is around 9.56%. That is not the end, as localities here can impose taxes on goods and services, which may range up to 7%. Therefore, in some areas of this state, the sales tax ratio can surge to around 11.45%. However, this most expensive sales tax-acquiring state has tax exemptions on groceries, prescription drugs, feminine products, and diapers.
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Tennessee
Tennessee’s statewide sales tax rate is 7%, and the average local sales tax rate is 2.556%. Combining the sales tax ratio of this state is 9.556%. This ratio makes Tennessee the second-highest state to levy sales tax. However, unlike Louisiana, the total tax ratio in this state remains below 10% in every locality. So you will not have to face a significant change in the tax ratio within the state. However, taxes are derived from grocery items at a reduced rate of 4% here.
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Arkansas
Arkansas’s combined sales tax ratio is 9.469% (6.5% by the statewide sales tax and 2.969% by the local sales tax). Though the average combined sales tax is relatively high, making it the third highest on our list, the cost of living here is relatively low regarding the national standards. That is why even if you have to pay a significant amount, such as the sales tax, your gross total product price can be less due to the low net production costs. As the taxable items cost less, your overall product pricing will not surge that high after adding sales tax. Arkansas also levies tax on groceries, though at a meagre rate of 0.125%.
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California
If you consider the statewide sales tax only, California has the highest statewide sales tax rate in the USA, with a sharp 7.25%. Its local sales tax rate is 1.552%. Therefore, the combined sales tax rate is 8.802%. However, in some cities like Burbank and Oakland, the tax rates are over 10%, whereas in cities like Napa and Auburn, the tax rate is below 8%. You will have to pay the combined taxes when purchasing vehicles and clothing.
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Indiana
Indiana’s statewide sales tax rate is 7.00%, making it the third highest statewide sales tax collecting state. However, the good thing is that this state does not apply any local or country sales tax on you. This means you must pay the fixed 7.00% sales tax on all taxable goods, irrespective of your operating area in this state. Prescription drugs, medical supplies, nonprepared foods, etc., are exempted from sales tax. Government agencies and nonprofit organisations are exempted from paying sales tax here.
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Mississippi
Mississippi also levies a statewide tax of 7.00%, whereas some of its cities charge an additional 1% upon it. For instance, Madison and Hinds County charge a combined 8% sales tax, but most other cities only charge you the statewide sales tax of 7%. Just like the above states, Mississippi too has tax exemption facilities for specific products,
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Rhode Island
Another state that levies a 7% statewide sales tax, just like Mississippi, is Rhode Island. An additional 6% charge will be applied to you in the name of hotel tax on availing hotel rooms, lodging houses, and motels. You may also have to pay an additional 1% local meal and beverage tax here. Retail clothing, medicine, and nonprepared food businesses can be profitable here as being exempted from taxes.
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Minnesota
The state of Minnesota charges its consumers and businesses around 6.875% sales tax. Additionally, you may have to pay up to 2% extra as a local sales tax, which can make the combined sales tax go up to 8.875%. Local taxes are applied here on liquor, beverages, food, and entertainment amenities. However, clothing and healthcare products here are totally tax-exempt.
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Nevada
Nevada’s statewide sales tax rate is 6.85%, and the state also levies local sales tax ranging from 0% to 1.525%. However, The Humboldt and the Eureka countries do not charge any local taxes. Here, you will get tax exemptions on items including newspapers, nonprepared food, farming equipment, etc.
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New Jersey
Lastly, New Jersey charges a statewide 6.625% sales tax, whereas there is no local sales tax levied on consumers. Sales taxes are charged on personal commodities, services, and digital products. Real estate sales are the best thing the state offers without tax obligations.
That is a wrap on the highest sales tax-levying states in the USA. As sales tax rates vary across the USA, consider reviewing the tax regulations thoroughly before expanding your business there.
Also, Read – Moving To a State With No Sales Tax: Pros, Cons, and Hidden Costs
FAQs
1. Which state has the highest combined state and local sales tax rates?
The combined sales tax rate is the highest in Louisiana. Other states with high sales tax ratios are Arkansas, Tennessee and California.
2. Which state has the highest local tax rates?
Louisiana has the highest local sales tax rate. Oklahoma, Colorado, Alabama, and others also levy high local sales taxes.
4. Which cities do levy the highest sales taxes?
Seattle and Washington are the cities with the highest sales tax rates. The combined sales tax rate here is 10.35%.
5. Which states have the lowest sales tax rates?
Five states, New Hampshire, Oregon, Montana, Alaska, and Delaware, offer the lowest sales tax. Together, these five states are known as NOMAD states.
