California Leads the Nation in Sales Tax Rates

California has the highest state sales tax rate in the country, according to a new report on sales and use tax rates.

The report by the Tax & Accounting business of Thomson Reuters found there were a total of 292 changes in sales and use tax rates during the first quarter of 2010, mostly at the city and county level, mainly in response to cutbacks in federal and state funding. That included one state change, 52 county changes, 172 city changes and 67 transit changes.

California had the highest state sales tax rate at 7.25 percent, followed by Indiana, Mississippi, New Jersey, Rhode Island, Tennessee and South Carolina at 7 percent, compared to the average state sales tax rate of 5.43 percent.

Sitka, Alaska, had the highest borough or county rate at 6 percent, followed by Hinsdale, Colo.; Juneau, Alaska; Chambers, Ala.; Tuscaloosa, Ala.; Iberville Parish, La.; Orleans Parish, La.; St. Bernard Parish, La.; and St Charles, La., at 5 percent; compared to the average county sales tax rate of 1.24 percent.

Alaska is home to the top 10 highest city rates. The highest taxing authority, with a combined sales tax rate of 12 percent, was Arab, Ala. (Cullman County), compared to the average combined rate of 8.39 percent.

“With 292 changes in Q1 2010, businesses continue to be challenged with the growing complexity of managing the sales and use tax process,” said Carla Yrjanson, senior director, Sabrix Tax Services, part of the Tax & Accounting business of Thomson Reuters. “If the rest of the year follows the current trend, we are on track for a record-breaking year in terms of sales and use tax changes, which will have a direct effect on the cost of compliance.”