- A new national report ranks Florida 23rd in the United States for combined sales and local taxes, with a sales tax rate of 6% and an average local sales tax of 1.02%.
- But while many states also have an income tax on top of state and local sales taxes, Florida does not, making it extremely competitive in overall taxation.
- Florida also recently added a permanent sales tax exemption on items for babies and toddlers, including diapers, wipes, and clothing, making it more affordable for families with young children.
(The Center Square) — A recent report from the Tax Foundation shows how sales tax and local taxes across the United States vary from state to state with Florida sitting in the middle of the pack.
The report found 45 states and the District of Columbia collect statewide sales tax. Some local sales taxes, which are collected in 38 states, are often larger than the state rate.
Florida has a combined sales and local tax ranking of 23rd with the state sales tax rate at 6% and local sales tax averaging about 1.02%, which is capped at 2% under state law.
According to the report, “Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs.”
Alabama, one of the top five states in the U.S with the highest combined sales and local tax rates, shares a border with Florida where taxes are much lower and, in some instances, nonexistent. Florida is often a shopping destination for residents of Alabama as a result.
Florida has a permanent sales tax exemption on items for babies and toddlers, including diapers, wipes and clothing. Gov. Ron DeSantis recently unveiled one of the biggest tax relief packages in the history of the Sunshine State, with most of it coming from sales tax exemptions.
Rather than reducing the sales tax rate permanently, states often opt for tax holidays and income tax cuts to better stimulate their economies and in the last two years, individual and corporate taxes have been reduced in over 24 states, with Florida taking the lead.
Some states actively compete against neighboring states who offer lower taxes. In order to compete with its neighbor Delaware who does not have a state sales tax, New Jersey designates some cities as “Urban Enterprise Zones”, which is a policy that allows retailers who qualify to collect and remit at half the 6.625% statewide sales tax rate.
In comparison, along with Alabama, the other top five states with the highest combined sales and local tax are Louisiana, Arkansas, Oklahoma and Tennessee, all sitting around an average of 9% respectively.
The top five states with the lowest combined sales and local tax rates are Alaska, Hawaii, Wyoming, Wisconsin and Maine, all averaging around 5%.
Alaska does not have a statewide sales tax, and the local sales tax is only 1.76%, but the cost of living is far higher than a warmer climate like Florida.
Delaware, New Hampshire, Montana and Oregon also do not have a statewide sales tax, however, income tax rates in these states are high, while Florida does not have state income tax.
At 7.25%, California takes the top spot for its statewide tax rate, followed by Tennessee, Indiana, Mississippi and Rhode Island. The highest local tax rates are in New York (4.25%), Colorado (4.88%), Alabama (5.25%), Louisiana (5.10%) and Oklahoma (4.48%).
The combined state and local sales tax rate in Texas is 8.25% in most cities.