Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections). They also benefit from being more pro-growth than the other major state tax, the individual income tax, because they introduce fewer economic distortions.
Forty-five states collect statewide sales taxes, while consumers also face local sales taxes in 38 states, including Alaska, which does not impose a statewide tax. These local rates can be substantial, and in some cases can rival or even exceed state rates, which means some states with moderate statewide sales tax rates actually impose quite high combined state and local rates compared to other states.
The five states with the highest average combined state and local sales tax rates are Louisiana (10.12 percent), Tennessee (9.56 percent), Arkansas (9.46 percent), Washington (9.43 percent), and Alabama (9.43 percent). The five states with the lowest average combined rates are Alaska (1.82 percent), Hawaii (4.50 percent), Wyoming (5.44 percent), Maine (5.50 percent), and Wisconsin (5.70 percent).
Sales tax rate differentials can induce consumers to shop across borders or buy products online. Sales tax bases also impact how much revenue is collected from a tax and how the tax affects the economy.
Sales taxes are just one part of an overall tax structure and should be considered in context. For example, Tennessee has high sales taxes but no income tax, whereas Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.
The data below provides a population-weighted average of local sales taxes as of January 1, 2025, to give a sense of the average local rate for each state. The 2025 table provides a full state-by-state listing of state and local sales tax rates.
2025 Sales Tax Rates by State
Combined State & Average Local Sales Tax Rates, January 2025
|
State |
State Tax Rate |
State Tax Rank |
Avg. Local Tax Rate |
Max Local |
Combined Tax Rate |
Combined Rank |
Max Local |
|
Alabama |
4.00% |
40 |
5.427% |
8.00% |
9.427% |
5 |
8.00% |
|
Alaska |
0.00% |
46 |
1.821% |
7.85% |
1.821% |
46 |
7.85% |
|
Arizona |
5.60% |
28 |
2.814% |
5.30% |
8.414% |
11 |
5.30% |
|
Arkansas |
6.50% |
9 |
2.960% |
6.13% |
9.460% |
3 |
6.13% |
|
California (a) |
7.25% |
1 |
1.552% |
4.75% |
8.802% |
8 |
4.75% |
|
Colorado |
2.90% |
45 |
4.957% |
8.30% |
7.857% |
16 |
8.30% |
|
Connecticut |
6.35% |
12 |
0.000% |
0.00% |
6.350% |
33 |
0.00% |
|
Delaware |
0.00% |
46 |
0.000% |
0.00% |
0.000% |
47 |
0.00% |
|
Florida |
6.00% |
17 |
0.948% |
2.00% |
6.948% |
28 |
2.00% |
|
Georgia |
4.00% |
40 |
3.418% |
5.00% |
7.418% |
19 |
5.00% |
|
Hawaii (b) |
4.00% |
40 |
0.500% |
0.50% |
4.500% |
45 |
0.50% |
|
Idaho |
6.00% |
17 |
0.027% |
3.00% |
6.027% |
37 |
3.00% |
|
Illinois |
6.25% |
13 |
2.640% |
4.75% |
8.890% |
7 |
4.75% |
|
Indiana |
7.00% |
2 |
0.000% |
0.00% |
7.000% |
24 |
0.00% |
|
Iowa |
6.00% |
17 |
0.942% |
2.00% |
6.942% |
29 |
2.00% |
|
Kansas |
6.50% |
9 |
2.273% |
4.25% |
8.773% |
9 |
4.25% |
|
Kentucky |
6.00% |
17 |
0.000% |
0.00% |
6.000% |
38 |
0.00% |
|
Louisiana |
5.00% |
32 |
5.116% |
7.00% |
10.116% |
1 |
7.00% |
|
Maine |
5.50% |
29 |
0.000% |
0.00% |
5.500% |
43 |
0.00% |
|
Maryland |
6.00% |
17 |
0.000% |
0.00% |
6.000% |
38 |
0.00% |
|
Massachusetts |
6.25% |
13 |
0.000% |
0.00% |
6.250% |
35 |
0.00% |
|
Michigan |
6.00% |
17 |
0.000% |
0.00% |
6.000% |
38 |
0.00% |
|
Minnesota |
6.88% |
6 |
1.250% |
3.00% |
8.125% |
15 |
3.00% |
|
Mississippi |
7.00% |
2 |
0.062% |
1.00% |
7.062% |
22 |
1.00% |
|
Missouri |
4.23% |
38 |
4.185% |
5.88% |
8.410% |
12 |
5.88% |
|
Montana (c) |
0.00% |
46 |
0.000% |
0.00% |
0.000% |
47 |
0.00% |
|
Nebraska |
5.50% |
29 |
1.472% |
2.00% |
6.972% |
27 |
2.00% |
|
Nevada |
6.85% |
7 |
1.386% |
1.53% |
8.236% |
13 |
1.53% |
|
New Hampshire |
0.00% |
46 |
0.000% |
0.00% |
0.000% |
47 |
0.00% |
|
New Jersey (d) |
6.63% |
8 |
-0.024% |
3.31% |
6.601% |
30 |
3.31% |
|
New Mexico (b) |
4.88% |
35 |
2.752% |
4.56% |
7.627% |
17 |
4.56% |
|
New York |
4.00% |
40 |
4.532% |
4.88% |
8.532% |
10 |
4.88% |
|
North Carolina |
4.75% |
36 |
2.246% |
2.75% |
6.996% |
26 |
2.75% |
|
North Dakota |
5.00% |
32 |
2.050% |
3.50% |
7.050% |
23 |
3.50% |
|
Ohio |
5.75% |
27 |
1.483% |
2.25% |
7.233% |
21 |
2.25% |
|
Oklahoma |
4.50% |
37 |
4.505% |
7.00% |
9.005% |
6 |
7.00% |
|
Oregon |
0.00% |
46 |
0.000% |
0.00% |
0.000% |
47 |
0.00% |
|
Pennsylvania |
6.00% |
17 |
0.341% |
2.00% |
6.341% |
34 |
2.00% |
|
Rhode Island |
7.00% |
2 |
0.000% |
0.00% |
7.000% |
24 |
0.00% |
|
South Carolina |
6.00% |
17 |
1.499% |
3.00% |
7.499% |
18 |
3.00% |
|
South Dakota (b) |
4.20% |
39 |
1.914% |
4.50% |
6.114% |
36 |
4.50% |
|
Tennessee |
7.00% |
2 |
2.556% |
2.75% |
9.556% |
2 |
2.75% |
|
Texas |
6.25% |
13 |
1.951% |
2.00% |
8.201% |
14 |
2.00% |
|
Utah (a) |
6.10% |
16 |
1.219% |
4.20% |
7.319% |
20 |
4.20% |
|
Vermont |
6.00% |
17 |
0.366% |
1.00% |
6.366% |
32 |
1.00% |
|
Virginia (a) |
5.30% |
31 |
0.471% |
2.70% |
5.771% |
41 |
2.70% |
|
Washington |
6.50% |
9 |
2.929% |
4.10% |
9.429% |
4 |
4.10% |
|
West Virginia |
6.00% |
17 |
0.569% |
1.00% |
6.569% |
31 |
1.00% |
|
Wisconsin |
5.00% |
32 |
0.702% |
2.90% |
5.702% |
42 |
2.90% |
|
Wyoming |
4.00% |
40 |
1.441% |
2.00% |
5.441% |
44 |
2.00% |
|
District of Columbia |
6.00% |
0.000% |
0.000% |
6.000% |
State Sales Tax Rates
Five states forego statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, only Alaska allows localities to impose local sales taxes.
California has the highest state-level sales tax rate, at 7.25 percent.[1] Four states tie for the second-highest statewide rate, at 7 percent: Indiana, Mississippi, Rhode Island, and Tennessee. The lowest non-zero state-level sales tax is in Colorado, which has a rate of 2.9 percent. Five states follow with 4 percent rates: Alabama, Georgia, Hawaii, New York, and Wyoming.[2]
Louisiana is the most recent state to raise its sales tax rate. The state rate increased from 4.45 to 5.0 percent, reversing a prior reduction implemented in July 2018. This rate increase was part of a broader tax reform package that yielded a 3 percent flat individual income tax, a 5.5 percent corporate income tax, full expensing, and franchise tax repeal.
Prior to that, South Dakota cut its state sales tax rate in 2023, a reduction set to expire after 2026, and New Mexico lowered the rate of its state-level sales tax — a hybrid tax the state refers to as its gross receipts tax — from 5.125 percent to 5 percent in July 2022. Notably, if the revenue from the gross receipts tax in any single fiscal year from 2026 to 2029 is less than 95 percent of the previous year’s revenue, then the state’s rate will return to 5.125 percent on the following July 1.
Before that, the most recent statewide rate reduction was Louisiana’s now-reversed cut in July 2018. Sales tax rate reductions have been relatively rare in recent years, as state lawmakers have instead prioritized income tax cuts, which yield more economic benefit, reducing individual or corporate income tax rates (or both) in 28 states since 2021. The continued erosion of sales tax bases has also been a factor.
Local Sales Tax Rates
The five states with the highest average local sales tax rates are Alabama (5.43 percent), Louisiana (5.12 percent), Colorado (4.96 percent), New York (4.53 percent), and Oklahoma (4.51 percent).
Average local sales tax rates rose in 14 states, led by Alabama, Utah, Colorado, Arizona, and Missouri, while declining in eight, most notably Florida, where one county’s surtax authority has been suspended temporarily.
In Alabama, Jefferson County’s sales tax rose by 1 percentage point. Jefferson is Alabama’s most populous county, with Birmingham as its county seat. In Arizona, Gilbert’s sales tax rose from 1.5 to 2 percent, while consumers in Surprise were, perhaps, surprised when the city’s rate jumped from 2.2 to 2.8 percent. And in Colorado, Denver’s sales tax increase, from 4.81 to 5.15 percent, marked the most significant change, though there were also sales tax increases in Canon City, Castle Rock, Glenwood Springs, Holly, and Superior.
In Florida, two Hillsborough County discretionary sales surtaxes totaling 1 percent have been temporarily suspended under a new law adopted in 2024, offsetting collections under a Hillsborough transportation surtax that was collected for three years before being struck down as unconstitutional in 2021. Revenues from the unconstitutional surtax are intended to be used as temporary replacement funding sources for the suspended surtaxes.
In Missouri, Chariton County slightly increased its emergency services sales tax from 0.875 percent to 1 percent, Osage and Pulaski counties imposed a 0.5 percent capital improvements sales tax, and the city of Boonville’s 0.875 percent capital improvements sales tax was allowed to expire, among other changes.
Three Utah counties—Box Elder, Juab, and Wasatch—and two cities—Scipio and Sterling—adopted a 0.3 percent additional sales tax to fund transportation. Many other jurisdictions across the country adjusted sales tax rates as well.
Some cities in New Jersey are in “Urban Enterprise Zones,” where qualifying sellers may collect and remit at half the 6.625 percent statewide sales tax rate (3.3125 percent), a policy designed to help local retailers compete with neighboring Delaware, which forgoes a sales tax. We represent this anomaly as a negative 0.03 percent statewide average local rate (adjusting for population as described in the methodology section below), and the combined rate reflects this subtraction. Despite the slightly favorable impact on the overall rate, this lower rate represents an implicit acknowledgment by New Jersey officials that their 6.625 percent statewide rate is uncompetitive with neighboring Delaware’s lack of a sales tax.
The Role of Competition in Setting Sales Tax Rates
Avoidance of sales tax is most likely to occur in areas where there is a significant difference between 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. For example, evidence suggests that Chicago-area consumers make major purchases in surrounding suburbs or online to avoid Chicago’s 10.25 percent sales tax rate.
At the statewide level, businesses sometimes locate just outside the borders of high sales-tax areas to avoid being subjected to their rates. A stark example of this occurs in New England, where even though I-91 runs up the Vermont side of the Connecticut River, many more retail establishments choose to locate on the New Hampshire side to avoid sales taxes.
One study shows that per capita sales in border counties in sales tax-free New Hampshire have tripled since the late 1950s, while per capita sales in border counties in Vermont have remained stagnant. At one time, Delaware actually used its highway welcome sign to remind motorists that Delaware is the “Home of Tax-Free Shopping.”
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.
Sales Tax Bases: The Other Half of the Equation
Sales tax rates differ by state, but sales tax bases also impact how much revenue is collected from a tax and how the tax affects the economy.
This report ranks states based on tax rates and does not account for differences in tax bases (e.g., the structure of sales taxes, defining what is taxable and nontaxable). States can vary greatly in this regard. For instance, most states exempt groceries from the sales tax, others tax groceries at a limited rate, and still others tax groceries at the same rate as all other products. Some states exempt clothing or tax it at a reduced rate.
Tax experts generally recommend that sales taxes apply to all final retail sales of goods and services but not intermediate business-to-business transactions in the production chain. These recommendations would result in a tax system that is not only broad-based but also “right-sized,” applying once and only once to each product the market produces. Despite agreement in theory, the application of most state sales taxes is far from this ideal, and occasionally gets worse. Ideally, states would modernize their sales tax regimes to better align with personal consumption in a changing economy.
Hawaii has the broadest sales tax in the United States, but it taxes many products multiple times and, by one estimate, ultimately taxes 119 percent of the state’s personal income. This base is far wider than the national median, where the sales tax applies to 36 percent of personal income.
