The U.S. average combined sales tax rate rose by a slight margin in Q2 due to minimal tax changes in most jurisdictions, according to the latest ONESOURCE Indirect Tax Report from Thomson Reuters.
The average state-level sales tax rose marginally from 5.535% to 5.56% in Q2 2016. Puerto Rico remains a significant outlier with a sales and use tax rate of 10.5%.
Louisiana and South Dakota increased their state-level tax rate in Q2 from 4 to 5%. The rate increase, in addition to its current average local tax rate of 4.99%, makes Louisiana the state with the highest combined state and local tax rate in the country. South Dakota’s sales tax rate climbed by 0.5% to 4.5%, bringing its combined sales tax rate to 6.34%, according to the report that summarizes quarterly changes in sales, use and value-added tax.
Carla Yrjanson, Thomson Reuters
Carla Yrjanson, vice president of tax research and content at Thomson Reuters, stated:
Though Q2 was relatively quiet, a few changes can result in rippling effects that professionals need to account for. Our report illustrates the seemingly unpredictable nature of tax rates from quarter to quarter. While changes in sales, use and value-added tax are not easy to predict, businesses must remain abreast of changes in real-time and react accordingly to keep their operations flowing flawlessly.”
Once again, Indiana, Mississippi, New Jersey, Rhode Island and Tennessee tied for the highest state sales tax rate at 7.0%, followed by Minnesota (6.875%) and Nevada (6.85%).
There were more standard sales tax rate changes in cities than in other jurisdictions, with increases in 61 cities, compared to 542 in Q1. The cities with the highest average combined sales tax rates were Tuba City, AZ (12.9%), Arab, AL (12.5%), Piedmont, AL (12.5%), and Sunset , AR (12.25%).
At the county level, Wrangell, AK, remains the highest-taxing jurisdiction for the last several quarters at 7.0%, followed by Petersburg and Sitka, AK (6.0%), and 11 counties in Alaska, Alabama, Colorado and Louisiana at 5%. The average county sales tax rates rose to 1.264% in Q2, from 1.259% in Q1.
Internationally, Argentina increased its special rate of excise tax from 60% to 75%, while China introduced a special rate tax of 5%. Additionally, the special rates of 3%, 5% and 20% in the authority of China Business Tax were end-dated effective April 30, 2016 to transition from the China Business Tax to the value added tax. Ecuador, Greece, India, Sri Lanka, and Aegean Islands all registered increases in their standard tax rates.