Louisiana now has the highest combined state and local sales tax rate in the United States at 10.13 percent, according to a midyear 2026 report from the Tax Foundation tracking sales tax rates across all 50 states. The report, published in July 2026, finds that retail sales taxes remain a major revenue source for most states, accounting for 32 percent of state tax collections and 13 percent of local collections. The nationwide population-weighted average combined sales tax rate stands at 7.53 percent.
Behind Louisiana, the states with the highest combined rates are Tennessee at 9.61 percent, Washington at 9.57 percent, Arkansas at 9.48 percent, and Alabama at 9.46 percent. On the state-level alone, California imposes the highest rate at 7.25 percent, while four states—Indiana, Mississippi, Rhode Island, and Tennessee—tie for second at 7 percent each. Five states levy no statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. Colorado has the lowest non-zero state rate at 2.9 percent. The report also identifies Alabama as having the highest average local sales tax rate at 5.46 percent, followed by Louisiana at 5.13 percent, Colorado at 4.99 percent, Oklahoma at 4.56 percent, and New York at 4.54 percent. Since January 2026, the report notes that North Carolina saw notable combined rate increases leading to a four-place rank change, while Wyoming was the only state that experienced a reduction in its combined rate due to several jurisdictions lowering their local option tax rates in February and July.
The report finds that Louisiana's current standing follows a state rate increase from 4.45 to 5 percent in January 2025, reversing a prior reduction from July 2018. According to the Tax Foundation, this rate increase was part of a broader tax reform package that yielded a 3 percent flat individual income tax, a 5.5 percent corporate income tax, full expensing, and franchise tax repeal. The authors write that sales tax rate reductions have been relatively rare in recent years, as state lawmakers have instead prioritized income tax cuts, which yield more economic benefit. There was no statewide tax rate change between January 2026 and July 2026.
The report explains that avoidance of sales tax is most likely to occur in areas where there is a significant difference between jurisdictions' rates, with research indicating that consumers leave high-tax areas to make major purchases in low-tax areas. The authors cite Chicago as an example, where consumers make major purchases in surrounding suburbs or online to avoid the city's 10.25 percent sales tax rate. At the statewide level, businesses sometimes locate just outside the borders of high-sales-tax areas—a phenomenon visible in New England, where retail establishments choose to locate on the New Hampshire side of the Connecticut River to avoid Vermont's sales taxes. The report warns that state and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate. The authors also note that sales tax bases vary greatly by state, with some exempting groceries while others tax them at full rates, and that tax experts generally recommend sales taxes apply to all final retail sales but not intermediate business-to-business transactions.
The report emphasizes that sales taxes are generally considered more pro-growth than income taxes because they introduce fewer economic distortions, though they're just one part of a state's overall tax mix and should be considered in context. Tennessee, for instance, has high sales taxes but no individual income tax, whereas Oregon has no sales tax but levies high income taxes. While many factors influence business location and investment decisions, the authors conclude that sales taxes are something within policymakers' control that can have immediate impacts—making the competitive balance between neighboring jurisdictions a critical consideration for state revenue planning.