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Rent prices aren't the only thing people consider when deciding where to live. Taxes can also play a huge role in where folks settle down. In fact, nearly 600,000 people relocated for tax purposes in 2016 alone. While income tax may be a more common consideration in regards to total cost of living, sales tax is another number to keep in mind — after all, you'll see the amount on every receipt! It's also a far less complicated tax than income tax since it requires no filing or paperwork. There are five states — Alaska, Montana, Delaware, Oregon, and New Hampshire — that have no state sales taxes at all. On the other end of the spectrum, however, there are eight states with the highest combined state and local sales taxes.
Kicking off the list is Kansas, with its combined sales tax rate of 8.68% and ranking eighth highest in the country. The "combined" sales tax refers to the inclusion of both state and local sales taxes. There is generally a statewide sales tax — in addition to taxes imposed by local cities and municipalities. The local taxes may vary across the state, so the combined rate refers to the average local tax combined with the statewide rate.
Unlike some states, Kansas doesn't exempt groceries from the sales tax. You may not mind, though, since you'll likely want to fill up on some famous Kansas City barbecue while you're there anyway. The city has plenty of other attractions to explore between meals, from the art at the Nelson – Atkins Museum to the Kansas City Zoo to the swing music scene. Don't forget about some of the state's smaller stops, though, such as the Old West town of Dodge City and the arts-centric community of Lucas.
The combined tax rate in Oklahoma is 8.94%, making it the seventh highest in the nation. That's driven by a high average local tax rate of 4.42%, while the statewide rate of 4.5% alone wouldn't even crack the top half of states. As a result, you could see a lower — or higher — sales tax, depending on where you live in the state.
The local tax rates in Oklahoma are also more complicated than in many other states, with different taxes potentially levied at city, county, school, transportation, and Special Purpose District (SPD) levels. Fortunately, you don't have to understand the tax code to enjoy a visit to the Sooner State. Check out famous sites along Route 66 or explore a wealth of lasso-twirling cowboy history in Oklahoma City at the National Cowboy and Western Heritage Museum.
Illinois clocks in at a 9.08% rate for combined sales taxes. Interestingly enough, the sales tax revenue accounts for less than 20% of the state's total tax collections, which is a significantly lower proportion than any of the other states on this list. The bulk of the revenue instead comes from the state's income tax, which is a flat rate of 4.95% for everyone, regardless of their income, and is one of the highest property taxes in the nation.
We hope those numbers don’t scare you away, because Illinois has plenty going for it. Chicago alone offers some of the most well-known destinations in the Midwest. These sites include “The Bean” in Millennium Park, the Lake Michigan shoreline, and the renowned shopping along the Magnificent Mile. Just don't forget about the tax on anything you buy!
If you're looking for tax-friendly states, Washington might pop up on your radar. After all, it's one of seven states without income taxes, which proponents say attracts young professionals to the area. Income tax isn't the only statistic to consider, however. Washington state actually has some of the highest sales taxes in the country, with an average combined state and local sales tax of 9.21%. These high rates are particularly evident in gas prices. Drivers here pay a tax of 49.4 cents per gallon — giving Washington one of the highest gas taxes in America.
Despite its high sales taxes, Washington does offer quite a few exemptions, such as food ingredients and prescription drugs. Nonresidents can even get sales tax exemptions on purchases of large items such as watercraft or trailers.
With a combined sales tax rate of approximately 9.22%, Alabama ranks fourth on the list. Despite this unusually high sales tax, the state actually collects fewer taxes per capita than any other state, and there are no sales taxes charged on some goods and services. For example, medical services, prescription drugs, and food stamp purchases are all exempt from Alabama's sales taxes.
Another exemption? Gasoline, which means you won't have to pay extra when driving to visit the state's various destinations. Science nerds will love exploring the U.S. Space and Rocket Center in Huntsville. History buffs should head to Birmingham for a look at some of the most significant sites like the Civil Rights Trail.
Arkansas ranks third among states with the highest sales taxes with a combined rate of 9.47%. The spike in rates began in 2013 when Arkansas residents voted to increase the state sales tax by half a percentage point in order to raise money for highway and general road maintenance. Like other states, however, there are purchases in Arkansas that are taxed at a lower rate or exempt from the sales tax altogether, including groceries, prescription drugs, and newspapers.
Before the tax hikes, Arkansas ranked as the state with the sixth-highest sales tax, but don't let the increase keep you from checking out this beautiful state. From the natural beauty of the Ozarks in the north to the historical significance of cities like Little Rock, Arkansas has something for everyone.
Nearly neck-and-neck with number one on our list, the combined sales tax rates for Louisiana is approximately 9.52%. Although the rate seems high, it actually indicates a slight rate reduction. Prior to 2018, Louisiana had the highest sales tax rates in the United States. Officials even admitted that Louisiana's tax structure was one of the country's worst.
In 2018, the state sales tax rate was lowered from 5% to 4.45%. Despite this, visitors should know that Louisiana charges sales taxes on hotel rooms, amusement park tickets, and parking lot fees. For dedicated travelers, though, this may not matter. After all, Louisiana offers a diverse range of cultural experiences, historical landmarks, and tasty Cajun and Creole cuisine to make up for the extra charges.
Tennessee beat Louisiana by a single hundredth of a percentage point with a combined sales tax rate of 9.53%. Unlike Louisiana, however, Tennessee has no income tax. With this factored in, residents might consider Tennessee's sales taxes just slightly more reasonable than Louisiana's. In fact, in the absence of income taxes, Tennessee gets approximately 60% of its state funding from sales taxes alone.
However, critics of these high rates have noted that sales taxes are regressive, which means that they have a higher impact on low-income families. This has led Tennessee to be listed in sixth place on the "Terrible 10" list, a ranking compiled by a Washington, D.C. think-tank.In order to combat its reputation for high taxes, Tennessee lawmakers are attempting to reduce taxes on groceries. Food items now have a special sales tax rate of just 5%. Special low rates also apply to clothing, prepared food, and medication — which are taxed at 7% each. Meanwhile, transportation, medical, and janitorial services are also exempt from Tennessee's state sales taxes.