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The Center Square [By Kim Jarrett] –
Tennessee is second only to Louisiana when it comes to the highest combined sales tax in the U.S., according to an analysis by the Tax Foundation.
The average tax rate is 9.61%, which is second to the Pelican State’s 10.11%.
When just the state rate is considered, Tennessee 7% sales tax is the same as Indiana, Mississippi and Rhode Island, according to the Tax Foundation. California (7.25%) is the only state higher.
Arkansas has the highest state sales tax rate among Tennessee’s neighbors at 6.5%. Kentucky is the second highest at 6%, followed by North Carolina at 4.75% and Georgia and Alabama at 4%.
Local Tennessee entities can charge an additional sales tax rate of up to 2.75%. Six Tennessee counties charge the lowest rate of 2%.
A majority of taxing entities charge the maximum rate, according to a map from the Tennessee Department of Revenue.
Two of Tennessee’s largest cities discussed raising their local rates in the past year. A bill that would allow Shelby County to raise its sales tax above the state maximum to 3.75% failed in the General Assembly. Local officials wanted to use the sales tax proceeds for a new county jail.
Knoxville voters will decide in November if they want to raise their sales tax from 2.25% to 2.75%. Part of the projected $47 million would be used to pave 75 miles of streets and to add new sidewalks near schools, according to the proposal submitted by Knoxville Mayor Indya Kincannon. The plan includes $10 million to ease what Kincannon called an affordable housing crisis in the city.
The Tax Foundation said sales tax rates should be taken in context.
“For example, Tennessee has high sales taxes but no income tax, whereas Oregon has no sales tax but high income taxes,” the organization said. “While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.”
