Every year, the Tax Foundation publishes two snapshots of where U.S. sales tax rates stand — one in January and one at midyear, reflecting the wave of local changes that take effect on July 1. The midyear update just dropped.
The headline: no state raised its base sales tax rate between January and July 2026. But beneath that stability, local rate changes shifted the combined rankings in ways that matter for businesses selling across state lines.
Here's what the 2026 midyear data tells us — and what it means for compliance.
The five states with the highest average combined state and local sales tax rates in 2026 are Louisiana at 10.13%, Tennessee at 9.61%, Washington at 9.57%, Arkansas at 9.48%, and Alabama at 9.46%.
Louisiana has held the top position since January 2025, when the state raised its rate from 4.45% to 5% as part of a broader tax reform package that also introduced a flat 3% individual income tax rate. That combination — the highest combined sales tax in the country paired with one of the lowest income tax rates — represents a deliberate trade-off. Louisiana funds its government heavily through consumption taxes rather than income taxes.
The Louisiana story is worth understanding because it's a preview of the debate happening in Missouri, which is considering eliminating its income tax and replacing it with expanded sales tax revenue. Louisiana's 10.13% combined rate is what happens when a state leans all the way into consumption-based funding — and Louisiana's residents pay that rate on virtually everything they buy.
Tennessee at 9.61% is particularly notable because Tennessee has no individual income tax — having fully eliminated the Hall Tax on investment income in 2021. Like Louisiana, Tennessee funds its government almost entirely through sales taxes. The state's 7% base rate plus local additions produce a combined rate that is among the highest in the country — and unlike Louisiana, Tennessee is actively debating whether to reduce the grocery portion of that rate.
At the other end of the spectrum, the five states with the lowest combined rates are all states with no statewide sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska — all at 0% for the state rate, though Alaska allows localities to impose their own taxes.
Among states that do levy a sales tax, Hawaii, Wyoming, Wisconsin, and Maine typically rank among the lowest combined rates in the country — with Hawaii's general excise tax structure making direct comparisons somewhat misleading, since it applies to gross receipts at every level of the production chain rather than just final retail sales.
There was no state-wide tax rate change between January 2026 and July 2026. This is notable — and increasingly rare. States have been far more active on sales tax base changes, exemptions, and digital goods taxability in 2026 than on headline rate changes.
But local changes were significant enough to move rankings.
Notable combined rate increases occurred in North Carolina — leading to a four-place rank change — Georgia, Washington, California, and Vermont. Wyoming was the only state that saw a reduction in its combined rate, which was due to several jurisdictions reducing their local option tax rates in February and July.
North Carolina's four-place jump is entirely attributable to one change: Mecklenburg County's 1% rate increase effective July 1, 2026 — the first rate change in Charlotte in 28 years. A single county's vote in November 2025 moved an entire state four places in the national rankings. That's how significant the Mecklenburg change was — and it's a concrete illustration of how local decisions shape the national picture.
The nationwide population-weighted average combined sales tax rate is 7.53%.
That's the number that reflects what the average American consumer actually pays in combined state and local sales tax — weighted by where people live, not just by what states exist. It accounts for the fact that more Americans live in high-population states with varying local rates than in low-population states with simpler structures.
For businesses trying to estimate their average tax collection burden across a national customer base, 7.53% is a reasonable working figure — though the actual rate for any specific transaction depends entirely on the delivery address.
The five states with the highest average local sales tax rates — meaning the local add-on above the state base — are Alabama at 5.46%, Louisiana at 5.13%, Colorado at 4.99%, Oklahoma at 4.56%, and New York at 4.54%.
Alabama's high local rate is particularly striking because Alabama's state rate is a relatively low 4%. But 5.46% in average local additions pushes the combined rate to 9.46% — fourth in the country. For businesses selling into Alabama, the local layer is more significant than the state layer — and tracking it at the address level is essential.
Several rate changes visible in the current data will shift the rankings again before the next midyear update.
South Dakota cut its state sales tax rate in 2023 — a reduction set to sunset in 2027. If South Dakota allows the cut to expire, its rate returns to its pre-2023 level and combined rankings shift accordingly. South Dakota's legislature will need to act to make the reduction permanent — and that decision hasn't been made.
New Mexico operates under a gross receipts tax rather than a traditional sales tax — currently at 4.875%, reduced from 5.125% in July 2022. The reduction includes a revenue trigger: if gross receipts tax revenue falls below 95% of the prior year's revenue in any single fiscal year from 2026 to 2029, the rate automatically reverts to 5.125%. A revenue shortfall — possible given New Mexico's oil-dependent budget — could trigger an automatic rate increase without any legislative action.
Washington D.C.'s general sales tax rate increases from 6.5% to 7.0% on October 1, 2026 — a change we covered in detail earlier this month. D.C. isn't ranked alongside states, but businesses selling into the District need to update their rates by October 1.
Louisiana's franchise tax repeal in 2026 improves its overall tax competitiveness ranking even as its sales tax rate remains the highest in the country — a reminder that the sales tax rate is just one dimension of a state's overall tax environment.
The Tax Foundation's combined rate rankings are a useful starting point — but they measure average rates, not the rate that applies to any specific transaction.
Several states with modest average combined rates have significant local variation. California's statewide rate is 7.25%, but combined rates in many cities exceed 10%. Texas's statewide rate is 6.25%, but combined rates in some cities reach 8.25%. The averages smooth out extremes that matter enormously for businesses selling into specific cities.
The rankings also don't account for base differences. States can vary greatly in what is taxable and what is not. For instance, most states exempt groceries from the sales tax, others tax groceries at a limited rate, and still others tax groceries at the same rate as all other products. Some states exempt clothing or tax it at a reduced rate.
Tennessee's 9.61% combined rate applies to a broad base that includes groceries — which is why Tennessee's rate feels particularly heavy on lower-income households. Louisiana's 10.13% rate also applies broadly, though Louisiana has specific exemptions for certain food and medical items.
For businesses managing multi-state compliance, the rankings are a useful orientation tool — but the actual compliance work requires address-level rates, product-specific taxability, and state-specific exemptions that averages can't capture.
South Dakota's 2023 sales tax rate cut is set to expire after 2026.
South Dakota reduced its state sales tax rate from 4.5% to 4.2% in 2023 — a consumer-facing cut that has been in place for three years. That reduction sunsets unless the legislature acts to make it permanent. The 2027 South Dakota legislative session will determine whether the cut extends or the rate returns to 4.5%.
For businesses selling into South Dakota, this is worth monitoring. A 0.3 percentage point increase may sound small — but for high-volume sellers, the compliance update and customer-facing price adjustment needs to happen before the first transaction of 2027 if the sunset occurs.
The midyear rankings tell a consistent story: state base rates are stable, but local rates are active. The compliance risk in 2026 isn't from states dramatically raising their headline rates — it's from the hundreds of local jurisdictions adjusting their add-on rates quarterly, often with minimal advance notice reaching businesses outside the immediate community.
North Carolina jumped four places in the national rankings because of one county's vote. Colorado's retail delivery fee increased. Illinois processed 202 local rate changes on July 1. Washington processed 864.
The businesses most exposed to unnoticed rate changes are those relying on state-level rate tables rather than address-level calculation — and those that do their rate review annually rather than quarterly.
Retail sales taxes are an essential part of most states' revenue toolkits, responsible for 24% of combined state and local tax collections. That share isn't shrinking. And as more states expand their sales tax base to include digital goods, services, and new categories, the compliance surface area for most businesses is growing — even when the headline rates hold steady.
Not sure whether your current sales tax rates reflect the midyear 2026 updates — especially for North Carolina, Washington, California, or Vermont where local rates shifted meaningfully in July? Book a free consultation with our team at sales.tax. We'll verify your rate setup across every state where you sell and make sure you're calculating correctly before your next filing period.