You’ll have to shop in states that either don’t have a sale tax, have a very low tax rate, or shop during a sales tax holiday if you don’t want to shell out a fair bit of extra money every time you approach a cash register. These locations are the best—and worst—for sales taxes as of 2022.
States With the Lowest Sales Taxes
The obvious frontrunners are those states with no sales taxes at all at the state level, but there were only five of them as of 2022: Delaware, Montana, New Hampshire, Alaska, and Oregon. Alaska falls into something of a gray area. The state doesn’t have a sales tax, but its localities do charge a tax, and the average rate statewide is 1.76%. Rounding out the top 15 states with the lowest sales tax rates—all under 5%—are:
Colorado at 2.9%Alabama, Georgia, Hawaii, New York, and Wyoming, all at 4%Missouri at 4.225%South Dakota and Oklahoma at 4.5%North Carolina at 4.75%
States With the Highest Sales Taxes
At the other end of the spectrum are states with very high state sales tax rates. In some cases, these rates are high enough that shoppers drive across state lines to visit lower-tax or tax-free states when they want to make major purchases. This frequently occurs in areas of Massachusetts that aren’t too far from tax-free New Hampshire. California has the dubious honor of having the highest statewide sales tax rate at 7.25%. It’s followed by:
Indiana, Mississippi, Rhode Island, and Tennessee at 7%Minnesota at 6.875%Nevada at 6.85%New Jersey at 6.625%Washington, Arkansas, and Kansas at 6.5%
What Purchases Are Taxed?
Most of these states with low sales tax rates exempt food items and many other necessary purchases as well, such as prescription drugs and clothing. But some states have separate, higher taxes for certain purchases like tobacco, alcoholic beverages, and gasoline. Starting 2020, New Hampshire will get you if you purchase tobacco products there—a pack of 20 cigarettes will cost you an extra $1.78, and a pack of 25 cigarettes has a tax rate of $2.23 per package. You can take heart if you live in Wyoming, however. The state had the lowest excise tax on beer in the country at just $0.02 per gallon as of 2022.
When Local Taxes Are Added in
Thirty-eight states allow local-level sales taxes. Among those that do, Hawaii, Wisconsin, Wyoming, and Maine all trail behind Alaska as having the lowest combined rates. Hawaii logs in at 4.44%, Wyoming at 5.22%, Wisconsin at 5.43%, and Maine at 5.50%. Also among the five highest combined state and local taxes are Arkansas at 9.47%, Washington at 9.29%, and Alabama at 9.24%, all as of 2022. Residents of Colorado Springs, Colorado voted to increase their city sales tax to 3.12% effective 2016 to help pay for highway and road maintenance, with the higher rate expiring after five years. That rate came down to 3.07% effective January 2021. That said, the combined sales and use tax rate for the city stands at 8.20%.
Offsets by Other Taxes
Sales taxes are only one of several ways that state governments can reach into your pocket for the cash that keeps them up and running. Some states take, but then they give back again. They pull much of their revenues from a single tax source and spare residents in other areas. For example, Tennessee’s significant combined state and local sales tax rate is offset by the fact that the state does not impose income tax. Your earned income is tax-free if you live there. Conversely, you’ll pay dearly in property taxes if you live in New Hampshire even though the state is sales-tax-free.
