Topping Out

State and local sales tax rates inch higher
June 2005

The national average sales tax rate rose to a record high in 2004. The combined rates of local and state government sales taxes reached 8.587 percent, a slight up tick from 8.5336 percent in 2003, according to a report from Vertex, a tax technology company.

The rate has climbed for the past four years, and the upward movement continued in 2004 despite a record number of tax-rate decreases. Much of the upward pressure on the tax rate can be attributed to budget difficulties that were pushed downward from the federal government. Election-year politics most likely contributed to the high number of tax decreases (160), but increases in other places pushed up the average.

The highest state sales tax rate is 7 percent, which is on the books in Mississippi, Rhode Island and Tennessee. The city with the combined highest rate is Arab, Alabama, where the total tax on sales is 12 percent.


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