State’s sales tax rate among nation’s highest

By Amye Anderson
UCBJ Managing Editor

TENNESSEE – Finance publication Kiplinger’s recently released its ranking of states with the highest sales taxes; listing the volunteer state as having the second-highest sales tax rate in the country.

The state’s average combined sales tax rate of 9.46 percent came in at approximately one-half of a percentage point lower than Louisiana; whose average combined sales tax rate is a whopping 9.98 percent. Each state has a percentage amount known as the state levy. For Tennessee, that rate is 7 percent. Localities can add up to an additional 2.75 percent on to that amount for a maximum combined 9.75 percent sales tax rate. Groceries, however, are taxed at 4 percent rate by the state plus the respective local rate that is in effect.

While Tennessee’s average sales tax rate is higher than most, residents aren’t required to pay state income tax. Nor are social security benefits taxed. However, the state does have the Hall Tax, which taxes dividends and some interest at 4 percent and offers an exemption for the first $1,250 in taxable income for individuals ($2,500 for joint filers). The Hall Tax rate is slated to be phased out entirely by 2021; declining one percentage point annually until then.

Of the 10 named in the rankings, those states are listed below from highest reported average combined sales tax to lowest:

  • Louisiana (9.98)
  • Tennessee (9.46)
  • Arkansas (9.30)
  • Alabama (9.01)
  • Washington (8.92)
  • Oklahoma (8.86)
  • Illinois (8.64)
  • Kansas (8.62)
  • New York (8.49)
  • California (8.25)

To read more about the rankings, visit www.kiplinger.com.

 

Amye Anderson is the managing editor of the Upper Cumberland Business Journal and can be reached at amye@ucbjournal.com.