State and Local Sales Taxes Increase Across U.S.

The U.S. average combined sales tax rate increased marginally in the third quarter with an increase in the number of indirect tax changes, according to the latest ONESOURCE Indirect Tax report from Thomson Reuters.

The report, which summarizes quarterly changes in sales, use and value-added tax, showed that state-imposed retail sales tax increased to 5.539 percent across the nation, after remaining unchanged at 5.457 percent for three consecutive quarters. Local tax rate changes showed a significant increase, from 197 in the second quarter to 220 in the third quarter.

“The increase in state tax rates and local tax changes this quarter marks a contrast to the relative stability in Q2,” said Carla Yrjanson, vice president of tax research and content at Thomson Reuters. “Recent changes should serve as a reminder for tax professionals to keep a vigilant eye on amendments and new filing requirements that could introduce additional complexity to their compliance efforts.”

Puerto Rico had the highest territory sales tax, at 10.5 percent, which is higher than any other state or territory-level rate in the U.S., followed by Indiana, Mississippi, New Jersey, Rhode Island and Tennessee, which all tied for the second-highest state sales tax rate of 7 percent. Minnesota and Nevada followed at 6.875 percent and 6.85 percent, respectively.

Jurisdictions with the highest combined sales tax rates were Tuba City, AZ, (12.9%), Arab, AL, (12.5%), Piedmont, AL, (12.5%), Coconino County, AZ, (11.9%), McKinley County, NM, (11.75%), Pinal County, AZ, (11.7%), Mansfield, AR, (11.625%),Cibola County, NM,(11.5626%), San Juan County, NM, (11.5626%).

Alaska once again claims the highest-taxing counties, with Wrangle, Petersburg and Sitka counties peaking with rates between 6 and 7 percent. Once again, Kodiak, AK, held the highest city sales tax nationwide at 7 percent, with Hoonah, AK, and Selawik, AK, following at 6.5 percent.

Internationally, the South Korean VAT Act was amended to apply a 10 percent tax rate to cross-border supplies of electronic services, including applications, games, films, music downloads and advertisements, effective July 1, 2015. Pakistan made multiple sales tax changes regarding various types of liquid fuel that took effect between July 1 and August 31, 2015, and the country’s 2015 Finance Bill introduced a new 7 percent tax rate beginning July 1, 2015. Additionally, the Aruba Health Tax rate of 1 percent was increased to 2 percent, effective July 8, 2015.

To download the full report, visit: https://tax.thomsonreuters.com/reports/indirect-tax-rates/2015_q3/.