Iowa Sales Tax: Middle of the Pack

Date: August 16, 2016 Last Edit: August 17, 2016

Study ranks state at 27th highest in nation.

Iowa Sales Tax: Middle of the Pack

Iowa’s fairly high state sales tax of 6 percent is offset by
its remarkably low local sales tax, which averages 0.8 percent and is capped at
just 1 percent.

That puts Iowa around the middle of the pack—27th highest in
the country—for sales tax rates, according to a recent study by the Tax Foundation.

The study, which took into consideration the
population-weighted average of state and local sales tax, provides a detailed,
though limited, view of the tax structure in each state.

Of the 45 states (and the District of Columbia) that collect
taxes, Louisiana, Tennessee, and Arkansas ranked the highest. Alaska, Hawaii,
and Wisconsin had the lowest total sales tax rate of the states that collect
taxes.

Most of Iowa’s other neighbors charge more in average combined
state and local sales taxes than the Hawkeye State’s 6.8 percent: Illinois
(8.65 percent), Missouri (7.87 percent), Minnesota (7.31 percent), and Nebraska
(6.87 percent).

This is likely benefiting Iowa towns near the borders. As the
Tax Foundation study points out: “Research indicates that consumers can and do
leave high-tax areas to make major purchases in low-tax areas.”

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