US Sales Tax Taxes Continue Upward Trend

October 13, 2010 Taxation in USA

Time 2 PayIn a continued battle against budgetary shortfalls, numerous rate increases have been recorded in the sales taxes levied by US states, counties, cities and districts, bringing the average combined rate levied on purchases to 9.64 percent. It is expected that sales taxes will continue to grow over the 2010 year.

Over the first 10 months of 2010 state-level sales tax rates in the US increased to an average level of 5.52 percent, the highest since 1982, according to data released on October 12th by the tax consultancy firm Vertex Inc. According to US tax legislation, sales taxes can be levied not only by state governments, but at a county, city and district level also, with governing authorities in each sector being able to chose their own rates. The sales taxes levied by counties, cities and districts are now also at their highest levels, at 1.55 percent, 1.66 percent, and 0.92 percent respectively.

Throughout 2010, three states governments opted to increase their sales tax rates. Arizona and Kansas both raised levies by 1 percent, to a level of 6.6 percent and 6.3 percent respectively. The state of New Mexico experienced a relatively smaller increase, going from 5 percent to 5.125 percent. In the same period forty county governments chose to bump up their tax rates, with another nine opting to introduce a levy where one didn’t exist before. Authorities in 135 cities across the US opted to increase their sales tax rate, with an additional 42 introducing their own sales tax. Only 16 US districts chose to levy a higher sales tax rate in 2010, although 188 decided to instate a new sales tax.

California remains to be the state with the highest state-level sales tax levied at 7.25 percent. Indiana, Mississippi, New Jersey, Rhode Island and Tennessee are all ranked as second, with a rate of 7 percent. At a city level Wrangell, Alaska was recorded to have the highest local tax rate, at a level of 7 percent.

The latest round of rate increases and introductions follows a three year spree of authorities at all levels seeking greater revenues from sales taxes. The data in the report indicates that there is a decrease in the number of regions choosing to hike rates in 2010, indicating a potential slow down, or even stop, to rate increase in the near future. However, John Minassian, Vice President of Tax Content Development for Vertex, said that he believes that tax rates will rise to even higher record levels before the end of 2010, with a possibility of an ensuing plateau.

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