Multi-State- To What Extent Does Your State Rely on Sales Taxes?


Sales taxes are the second largest source of state and local tax revenue, accounting for 23.6 percent of total U.S. state and local tax collections in fiscal year 2017.

While 45 states levy a statewide sales tax and 38 allow localities to collect separate sales taxes, four states levy neither a state nor a local sales tax: Delaware, Montana, New Hampshire, and Oregon (see Facts & Figures Table 19). Eight states levy a sales tax at the state, but not the local, level: Connecticut, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, and Rhode Island. Alaska is the only state that permits local sales taxes without imposing a state sales tax.

Consumption taxes are generally more stable than income taxes in economic downturns as well, although the current coronavirus outbreak differs from other crises in that consumption has dropped dramatically due to the nature of pandemics.

Although Washington, Nevada, Tennessee, and South Dakota (38.7 percent) all rely heavily on the sales tax, they are not high-tax states. All four states forgo an individual income tax and choose to raise a large portion of their revenue through the sales tax instead. South Dakota additionally forgoes corporate income taxes. Wyoming does not levy individual or corporate income taxes either but manages to land near the middle of the pack (23.8 percent) in terms of sales tax reliance due to its heavy reliance on severance tax collections. This trade-off between income and sales can be a good thing, as it allows states to avoid relying on the less economically neutral individual income tax.


For more information: Tax Foundation

Tax Foundation
by janelle cammenga
may 20, 2020