Sales Tax Rates Held Steady in Q3

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Sales tax rates for the most part stayed unchanged in the third quarter of the year, according to a new report.

The latest ONESOURCE Indirect Tax Report from Thomson Reuters found the average combined sales tax rate in the U.S. increased only marginally in Q3 thanks to stable sales tax rates and slight increases to city and county-level tax rates, The average state-level sales tax rate held steady at 5.56 percent during the third quarter of the year. Puerto Rico held its position as the U.S. territory with the highest rate of 10.5 percent. Meanwhile, the states of Indiana, Mississippi, New Jersey, Rhode Island and Tennessee again tied for the highest state sales tax rate at 7.0 percent, followed by Minnesota at 6.875 percent and Nevada at 6.85 percent. 

Cities had many more tax rate changes than states. During the third quarter, 51 changes occurred in cities and 21 new city rates appeared. The cities that had the highest average combined sales tax rates were Tuba City, Alaska (12.9 percent); Arab, Alabama (12.5 percent); Piedmont, Alabama (12.5 percent); and Sunset, Arkansas (12.25 percent).

At the county level, Wrangell, Alaska, held its position as the highest-taxing jurisdiction for the past several quarters at 7.0 percent. It was followed by Petersburg and Sitka, Alaska (6.0 percent); and 11 counties in Alaska, Alabama, Colorado and Louisiana at 5.0 percent. The average county sales tax rates increased a bit to 1.267 percent in Q3 from 1.264 in Q2.  

“While U.S. state-level rates remained unchanged from Q2, there were a total of 130 regular sales tax rate changes in the U.S. alone this quarter, including 57 new rates introduced in Q3,” said Thomson Reuters vice president of tax research and content Carla Yrjanson in a statement. “Businesses must be informed of these changes as they happen to ensure that all of their tax obligations are properly met.”  

Other countries saw more extensive changes. Egypt introduced a VAT system, with a standard tax rate of 13 percent and a reduced rate of 5.0 percent, both taking effect Sept. 9, 2016. Sri Lanka reduced its standard tax rate from 15 to 11 percent, effective July 12, 2016, while Thailand debuted three special rates, effective Sept. 1, 2016.

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