Tennessee’s Reliance On Sales Tax 3rd Highest In United States

Sales Tax Collections In Tennessee Came In At 40.7%, Representing The Third-highest Percentage Among The 50 States. 

Photo Credit: sos.tn.gov

Published March 5, 2021

The Center Square –

As a share of total state and local tax revenues, sales tax collections in Tennessee came in at 40.7%, representing the third-highest percentage among the 50 states, according to a new Tax Foundation analysis.

That percentage was well above the average level of state reliance on sales taxes (23.3%). The Tax Foundation study is based on the most recent data available, which reflects tax collections during fiscal year 2018. 

Consumption levies such as sales taxes are considered more stable than other taxes, including state income taxes, during economic downturns, according to the Tax Foundation. During the coronavirus era, sales tax collections initially dropped, but they recovered as more businesses reopened and consumers turned to online venues for products, the study said.

Four states – Delaware, Montana, New Hampshire and Oregon – have no state or local sales taxes, while Alaska allows for local sales taxes but has no statewide sales tax, according to the Tax Foundation. The remaining 45 states have statewide sales taxes in place, the study said, and 38 allow local governments to collect separate sales taxes.

Which States Are Most Dependent on Sales Taxes?

Rank	State	% of Total State and Local Revenues Coming From Sales Taxes
1	Louisiana	42.3%
2	Nevada	41.3%
3	Tennessee	40.7%
4	Arizona	40.5%
5	South Dakota	39.3%
6	Florida	38.3%
7	Arkansas	37.8%
8	New Mexico	37.3%
9	Hawaii	36.7%
10	Washington	36.4%
11	Texas	34.5%
12	Oklahoma	32.7%
13	Mississippi	31.7%
14	Alabama	30.5%
15	Kansas	29.6%
16	Indiana	28.5%
17	Missouri	27.4%
18	Ohio	26.8%
19	Colorado	26.7%
20	Idaho	26.6%
21	Wyoming	26.5%
22	North Carolina	26.2%
23	Georgia	23.9%
24	Utah	23.9%
25	Nebraska	22.5%
26	Michigan	22.3%
27	Iowa	22.2%
28	South Carolina	21.1%
29	Maine	20.6%
30	Kentucky	20.3%
31	Wisconsin	20.2%
32	North Dakota	20.1%
33	California	19.7%
34	Illinois	18.4%
35	West Virginia	18.1%
36	Rhode Island	17.1%
37	Pennsylvania	17.0%
38	Minnesota	16.9%
39	New York	16.6%
40	New Jersey	15.9%
41	Connecticut	14.9%
42	Massachusetts	13.5%
43	Virginia	13.0%
44	Maryland	12.0%
45	Vermont	10.4%
46	Alaska	6.9%
47 (tie)	Delaware	0.0%
47 (tie)	Montana	0.0%
47 (tie)	New Hampshire	0.0%
47 (tie)	Oregon	0.0%