Sales and Use Taxes Keep Rising
Sales and use taxes continue to rise on average nationwide, according to a new report, with an average combined rate in mid-2011 of 9.63 percent, compared to 9.61 at the end of 2010.
A mid-year report by tax technology provider Vertex Inc. found that states, counties, districts and cities around the country are continuing to raise their taxes in response to budget problems. The average city tax rate rose to 1.67 percent in mid-2011, compared to 1.66 percent at the end of 2010. However, the average state sales tax rate remained stable at 5.52 percent, the same as where it was at the end of 2010. Meanwhile, county taxes have declined somewhat, with the average county tax declining to 1.53 percent, compared to 1.55 percent at the end of 2010.
The number of changes in sales and use tax rates for the first six months of 2011 decreased to 255 compared to 347 for the first six months of 2010. Of the 255 changes, 127 were tax increases, 30 were decreases and 98 were new taxes.
“The number of rate changes and new taxes across the U.S. declined compared to last year, continuing a trend we saw at the end of 2010,” said Vertex chief indirect tax officer John Minassian in a statement. “While the average combined rate continues to reach record levels, it appears that the steep rate increases and pace of tax changes of the last eight years have slowed to some degree in 2011. The real issue for corporate tax practitioners is that the potential for rate changes has significantly increased the burden on companies to consistently and accurately track tax changes.”
California’s sales tax rate decreased from 7.25 to 6.25 percent at the beginning of July. Two other states had changes in their state sales tax rate effective July 1: Connecticut increased from 6.0 to 6.35 percent, while North Carolina decreased from 5.75 to 4.75 percent. However, these changes are not reflected in the statistics for the first six months of 2011.
Five states—Indiana, Mississippi, New Jersey, Rhode Island and Tennessee—had the second highest rate at 7.00 percent, right behind California’s recently changed 7.25 percent rate. The highest city sales tax rate was found in Wrangell, Alaska (7.0 percent). Several other Alaska cities came in second at 6.0000 percent: Kodiak, Hoonah, Dillingham, Cordova Buckland, Bethel, Petersburg, Kotzebue, Sitka and Thorne Bay.
The highest combined sales tax rate of 13.73 percent was found in Tuba City, Arizona.
Since 2003, there have been 2,031 new sales and use taxes, for an average 238 of per year, and 3,631 sales and use tax changes, an average of 427 per year. The combined number of new and changed sales and use tax rates since 2003 was 5662, or an average of 666 per year.