Arizona Sales Tax Higher than Most Neighboring States

Date: August 16, 2016 Last Edit: August 18, 2016

State and local rate is 11th biggest in country.

Arizona Sales Tax Higher than Most Neighboring States

Arizona’s sales tax rate isn’t terrible compared to the rest of
the country, but it’s not great either, according to a new study by the Tax Foundation.

With a state tax of 5.60 percent and an average local tax of
2.65 percent, Arizona’s overall combined average rate is 8.25 percent, which
ranks 11th highest in the U.S.

Arizona’s rate is higher than neighboring states Nevada (7.98
percent), New Mexico (7.55 percent), Colorado (7.5 percent), and Utah (6.76
percent). California’s combined average sales tax is a bit higher than
Arizona’s, at 8.48 percent.

The study points out that high sales taxes can backfire if
residents start making their major purchases just over a border where taxes are
cheaper. “State and local governments should be cautious about raising rates
too high relative to their neighbors because doing so will yield less revenue
than expected or, in extreme cases, revenue losses despite the higher tax
rate.”

However, in a tourism-heavy state like Arizona, the good news
is that visitors contribute substantially to the overall sales tax collections.

Coconino County has the highest local and state tax rate in the
state at 10.9 percent, the most currently allowed in
Arizona.

The Tax Foundation report ranks all 45 states that charge sales
tax based purely on the sales tax rate, without taking into consideration
difference in tax bases (what’s taxable and what’s not).

Louisiana and Tennessee ranked as the worst states for sales tax, with rates of 9.98 and 9.45 percent. Alaska and Hawaii have the lowest overall sales tax, with rates of 1.78 and 4.35 percent.

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