With the recent debate surrounding the 2019 tax reform bill (SB 2001) in Utah and the sales tax on food, we thought it would be a good idea to examine various sales tax rates across the nation and see how Utah compares. This analysis, taken in part from the Washington D.C. based Tax Foundation, uses the state sales tax rate and adds an average of the local sales tax rates in each state, since each state has varying levels of local rates. In some cases, the local rates exceed the state rates.
As a reminder, Utah has a state sales tax rate of 4.85%. The rate was recently raised from 4.70% to 4.85% when voters passed a ballot initiative for Medicaid expansion, as it contained an increase in the rate to fund some of the cost of expansion. Local option sales tax rates vary across the state from county to county and city to city. This is due to all of the various local option sales taxes that the cities and counties have stacked onto a virtual Christmas tree of ornaments to fund all kinds of programs like transportation and infrastructure, arts and parks. Some counties and municipalities have been more restrained than others in imposing these legislatively authorized sales tax options and so the total state and local rate may be as low as 6.35% total in Beaver county and as high as 7.75% in Salt Lake City.
As we know from the recent debate on the sales tax on food (unprepared groceries), the state rate is 1.75% on food, plus the local tax of 1.25% for a total of 3%.
Utah is in the middle of the pack, ranked at #20 highest with a combined average rate of 7.18%. The highest combined rank is paid by folks in Tennessee at 9.53% while the lowest is paid in Alaska at only 1.76% on average. Four states have no sales tax: Oregon, Montana, Delaware and New Hampshire.
Sales tax is a more stable revenue source than income tax and is seen as a fair way of taxing consumption, versus the more economically damaging income tax that takes money out of the pockets of taxpayers right away.