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John Minassian
John Minassian

Modest Declines in the Combined Average Sales Tax Rate and Number of Rate Changes in 2011

Average U.S. combined sales and use tax rate and number of changes begin to recede from record highs.

February 23, 2012
by John Minassian, Chief Sales & Use Tax Officer, Vertex Inc.

The number of sales tax rate changes across the U.S. showed modest decline in 2011, as did the combined average sales tax rate. This based on data from the annual Sales & Use Tax Rate Report issued by Vertex Inc. for 2011.

The number of rate changes at the state, county, city, and district level declined to 459 in 2011, compared to 555 in 2010, 707 in 2009 and a record 797 in 2008. Of the 459 changes, 232 were tax increases, 175 were new taxes and 52 were decreases.

The combined average sales tax rate, which includes U.S. state, county, local and special purpose tax districts, totaled 9.60 percent for the full-year 2011, compared to a record 9.64 percent in 2010.

The average state-level sales tax rate declined slightly in 2011 to 5.49 percent compared to 5.52 percent in 2010. The states of Indiana, Mississippi, New Jersey, Rhode Island and Tennessee have the highest sales tax rate at 7.00 percent.

During 2011 three states changed their rates:

  • California decreased its rate to 6.25 percent from 7.25 percent
  • North Carolina decreased its rate to 4.75 percent from 5.75 percent
  • Connecticut is the only state that raised its rate for the year to 6.35 percent from 6.00 percent

The average county tax rate for the full year declined slightly to 1.53 percent, compared to 1.54 percent in 2010. The average city rate increased slightly in 2011 to 1.67 percent, compared to
1.66 percent in 2010.

The leveling of both the number of rate changes and the average combined rate in 2011 can be attributed to a number of factors. Specifically, it may reflect a modest improvement in the overall economy, or that governments have exhausted the amount of revenue that can be generated through new and increased sales tax rates.

Looking ahead, the number of rate changes and combined average rate should be expected to remain level in the coming year. While this may spell some relief for consumers, tracking and managing sales tax rates across the over 9,600 taxing jurisdictions in the U.S. will remain challenging at a corporate level.

Additional highlights from Vertex’s 2011 Sales Tax Rate Report:

  • The highest city sales tax rate in 2011 was Wrangell, Alaska, at 7.00 percent
  • The highest combined sales tax rate of 13.725 percent is found in Tuba City (including the surrounding areas that are in the To’Nanees ‘Dizi Local Government), Coconino County, Arizona
  • Since 2003 there have been 2,109 new sales and use taxes, an average of 234 per year, and 3,757 sales and use tax changes, an average of 417 changes per year

About the Author: John Minassian joined Vertex in 1999 and leads tax researchers supporting Vertex’s income tax application and an assortment of transactional tax applications. As Chief Sales & Use Tax officer, he writes and speaks on today's tax issues and currently leads the tax research function for Vertex Inc. Minassian’s work experience includes positions with E. I. DuPont de Nemours, ICI Americas and AMP, Inc. (now Tyco Electronics). He holds a B.A. from the University of Pennsylvania, a Master of Business Administration from Drexel University, and a Master of Taxation from Villanova University.