Don't Mess With Taxes

Photo by Pavel Danilyuk

The Texas Comptroller Glenn Hegar today announced cities, counties, transit systems, and special purpose districts soon will be getting their share of $1.1 billion in local sales tax allocations for September. That's 6.3 percent more than last September.

Sales taxes are one of the three major ways states and the assorted jurisdictions within their borders get revenue. The other two are property taxes, mostly on real estate value, and income earned by individuals and businesses.

Since the Lone Star State has no personal income tax, most of us residents are resigned to generally high sales and property taxes.

Texas' sales tax rate is 6.25 percent. Here in Austin, we city shoppers also pay an additional 2 percent that eventually goes into the capital city's coffer, a la the regular disbursements like those announced today by Hegar.

Not that much, relatively shopping: I can't complain that much about the city’s tax. I don't buy much aside from groceries, and most edible items I buy at my local H-E-B are not taxed.

Basically, I've always suspected things could be much worse, at least taxwise.

Statewide, that’s true. My fellow Texas consumers in other urban areas also face the 2 percent added tax. And I prefer living in an urban area, even with higher costs, like sales tax rates.

Overall in this latest sales tax allocation, Austin will get more than $28.8 million. That’s fourth among the state’s top 20 cities that collect sales and use tax. Houston, San Antonio, and Dallas are getting more. 

My general acceptance of Austin's sales tax rate as not that heavy also is borne out by the Tax Foundation's mid-year analysis of sales tax rates in major cities.

"In many cases, these local sales taxes comprise a significant share of the overall rate paid by consumers," writes Jared Walczak, the Washington, D.C.-based tax policy nonprofit's Vice President of State Projects, in the survey analysis introduction.

But according to the biannual calculation is of the average combined state and local sales tax rates by state, Austin and the 14 other counted Texas cities come in 47th in the overall list of 122 ranking levels.

Costliest cities for consumers: So, which major city shoppers pay the most sales tax? Seattle, Washington, consumers face the highest combined state and local sales tax rate, at 10.35 percent.

Walczak note’s that Seattle’s rate was bumped up enough to take the top spot when in April King County, where the Emerald City is located, adopted a 0.1 percent additional sales tax to generate additional funding for nonprofits providing cultural programming.

Nearby Tacoma, Washington, is second with a 10.3 percent combined sales tax rate.

Chicago, Illinois, and the California cities of Long Beach, Fremont, and Oakland tied for third-highest major city rates at 10.25 percent.

Baton Rouge, Louisiana, is fourth at 9.95 percent. That ranking is due in large part to its 5.5 percent local sales tax rate, which is the highest local levy in the country, notes the Tax Foundation’s Walczak. The city’s rate also exceeds the Pelican State's 4.45 percent sales tax rate.

St. Louis, Missouri, has a local rate of 5.454 percent, just a fraction less than Baton Rouge, but enough to put that Show Me State municipality in fifth place.

I know, by now you're asking, "What about the Big Apple?" It's up there, but not as much as those of us who know New York City mainly through the media might think.

New York City and Yonkers both have a local sales tax rate of 4.875 percent, reports the Tax Foundation. That's higher than New York’s statewide rate of 4 percent, putting their combined sales tax rate at 8.875 percent. That's the same combined sales tax rate as Modesto, California, and puts the two Empire State cities and Golden State municipality in a three-way tie at 25.

City sales tax savings: So, where is the city to shop for sales tax savings?

You also can head to the bright lights in states with no general statewide sales taxes. That's Alaska, Delaware, Montana, New Hampshire, and Oregon. For future shopping excursions, keep the NOMAD mnemonic in mind: “N” for New Hampshire, “O” for Oregon, and so forth.

Or, notes the Tax Foundation, you also can go to one of the nine major cities that, while located in states with statewide sales taxes, do not impose local sales taxes of their own.

But among major cities in states that do levy sales taxes, say aloha to Honolulu. The sales tax rate of 4.5 percent in the capital and largest city in Hawaii is the lowest.

Madison, Wisconsin, with its sales tax rate of 5.5 percent is the next lowest.

Seven jurisdictions have a combined sales tax rate of 6 percent. They are Richmond, Virginia; Washington, D.C.; Detroit, Michigan; Louisville, Kentucky; Baltimore, Maryland; Lexington, Kentucky; and Boise, Idaho.

Check out the full list and Walczak’s detailed analysis of the cities’ sales tax rates. It gives you an idea of just how much goes into determining the rates, as well as whether a taxing jurisdiction is, indeed, a low-tax locale as far as your finances and lifestyle are concerned.

You also might find these items of interest:

• Oklahoma’s grocery sales tax ends in late August
• Nebraska consumption tax effort suffers EPIC fail + sales tax rates nationwide)
• 13 states hold sales tax holidays in August; 2 from July continue into this month

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