How do State and Local Sales Taxes Work?

The 45 states and the District of Columbia of the United States (US) charges the general sales tax which applies (with some exceptions) to all the goods and certain services.

But there are also 37 states (including the state of Alaska, which has no state tax). In states like these also allow the customers to pay general sales taxes at the local level. But for both the state and local level, sales tax filing is important.

Though most states apply some separate sales taxes to particular goods, which include alcohol, tobacco, and motor fuels. Most of the states rely on the sales tax more than the local governments do.

In the year 2017, the states of the United States collected around $457 billion from the sales tax. Also, 35% of their own-source revenue comes from the sales tax.

State and Local Sales Tax Revenue (2017):

  1. General Sales Tax

Levels

Revenue (billions)

% of own-source general revenue

State and Local

389

16

State

300

23

Local

89

8

  1. Selective Sales Tax

Levels

Revenue (billions)

% of own-source general revenue

State and Local

191

8

State

157

12

Local

34

3

How do State and Local Sales Taxes Work?
How do State and Local Sales Taxes Work?
  1. Total Sales Tax (2017)

Levels

Revenue (billions)

% of own-source general revenue

State and Local

581

24

State

457

35

Local

124

11

The state of Nevada depended on the sales tax revenue more than any other state in the year 2017, with the selective sales tax and general sales tax accounting for 47% of the combined state and the local own-source general revenue.

The general sales tax and selective sales tax mentioned in the above tables represent that 30% or more of the combined state and local revenue in the states of Arizona, South Dakota, Florida, Hawaii, Louisiana, New Mexico, Texas, Arkansas, Tennessee, and Washington.

Among these states with the general sales tax, the states of Massachusetts and Wyoming are the ones who relied the least on the general sales tax and the selective sales tax revenue. The percentage combined of state and local own-source revenue for these states was 15% in both Massachusetts and Wyoming.

Every state and the District of Columbia of the United States (US) collected the revenue from the selective sales tax in the year 2017. The average revenue of these taxes was 8% of state and local revenue, but around 15 states of the US collected 10% or more on the selective sales tax revenue.

In 2017, the highest revenue collected on the selective sales tax was by the state of Nevada which was 17% and the lowest was collected by the state of Wyoming which was only 4%.

On the local level, sales tax is collected on the local stores for their goods and services. This sales tax is the revenue for the local government and is used for the welfare of the community.

On the state level, the sales tax is collected on Tobacco, alcohol, and Motor fuels. So, the sales tax here is pretty higher than the local sales tax. So, this is the way both the state and local sales tax work in the United States (U.S.).

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Shashank Jain

Shashank Jain, founder of good-name, a young and energetic entrepreneur has always been fond of technology. His liking for technology made him go for engineering in computers. During his studies, he learned & worked on different computer languages & OS including HBCD, Linux, etc. He also has a keen interest in ethical hacking.

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