Consumer taxes for retail sales items, gas and cigarettes have all continued to climb in the past year, according to an annual survey of consumption taxes by CCH.

Five states increased their tax on gasoline, five states increased their sales tax and 11 states increased their tax on cigarettes. The District of Columbia also increased its taxes across all three consumer tax categories, joining North Carolina, which is the only state to also hike taxes in all three areas. Florida was the only state to report a tax reduction – lowering its gas tax from 16.1 cents to 16 cents.

CCH compiled a national map of tax rates showing how the rates varied in each category across the U.S. as of July 1, 2010.

“From the increases in consumer taxes, it’s evident that many states are trying to shore up revenue shortfalls,” said CCH senior state tax analyst Daniel Schibley. “Many other states have not yet increased taxes, but may so.”

While the price of gas has headed downward in the past few months, taxes on gas have headed upward for drivers in five states: California, Kentucky, Minnesota, Nebraska and North Dakota, as well as the District of Columbia. The rate has increased incrementally in some states, for example, from 27.1 cents to 27.5 cents per gallon in Minnesota while nearly doubling in the past year in California, from 18 cents to 35.3 cents per gallon.

However, Washington State continues to have the highest state gas tax at 37.5 cents per gallon, while Georgia continues to levy the lowest state gas tax of just 7.5 cents per gallon. Many drivers actually pay more than that basic rate when they pull up to the pump.

Taxes and fees related to environmental impact, licenses and inspections may also be passed through at the pump to consumers in a number of states. For example, Alabama drivers contribute significantly more to the state treasury than their state’s 16-cent gas tax for every gallon of gas they buy. In many states, at least part of the gas tax rate is linked to the wholesale cost of fuel or the cost of highway construction.

Five states – Alaska, Delaware, Montana, New Hampshire and Oregon – impose no sales tax.

Of the remaining states, Colorado is at the bottom of the scale with a sales tax of just 2.9 percent while California is at the top, at 8.25 percent. California’s rate includes a 1-percent sales tax collected on behalf of local governments; Virginia also collects a 1-percent sales tax for local governments (this 1 percent is included in the statewide rate shown on the map).

Over the past year, five states have increased their sales tax rate: Arizona, Kansas, Massachusetts, New Mexico and North Carolina. The District of Columbia also increased its sales tax. Increases have ranged from incremental in states like New Mexico, which increased its rate from 5 percent to 5.125 percent, to more significant in states such as Massachusetts, where the rate has increased from 5 percent to 6.25 percent over the past year. In all, 25 states and the District of Columbia now impose a sales tax of 6 percent or more.

However, statewide sales tax rates are often only part of the tax consumers pay as county, city and other local jurisdictions may add their own sales taxes on top of state taxes, which can easily add up. For example, Colorado’s statewide 2.9 percent rate becomes 8.4 percent in Steamboat Springs and 8.9 percent in Winter Park. In Kansas City, the sales tax adds up to 8.925 percent (including the state’s 6.3 percent tax) in most areas, though Kansas City taxes can go as high as 9.925 percent in the city’s special taxing districts.

The nation’s top honors citywide are Chicago, which imposes a 9.75 percent rate once county, mass transit and city levies are added to Illinois’ statewide 6.25 percent sales tax, and Los Angeles, which also has a 9.75 percent tax rate.

Taxes on cigarettes went up in many states over the past year, with 10 states adding on to their cigarette taxes: Connecticut, Delaware, Hawaii, New Mexico, New York, North Carolina, Pennsylvania, South Carolina, Washington and Wisconsin. The District of Columbia also increased its tax. In fact, both the District of Columbia and Hawaii increased their taxes on cigarettes the previous year as well.

One of the biggest percentage increases occurred in South Carolina, where cigarette taxes went from the lowest in the nation at 7 cents per pack to 57 cents. Now, Missouri boasts the lowest cigarette tax at 17 cents per pack, unchanged from last year. Also now lower than South Carolina’s cigarette taxes are taxes in Alabama, Georgia, Louisiana, North Carolina, North Dakota, Virginia and West Virginia.

By far, the highest state cigarette tax is assessed by New York – where the tax is now $4.35 per pack, up from $2.75 last year. Four other states that raised cigarette taxes to $3 or more per pack over the past year include Connecticut, Hawaii, Rhode Island and Washington.

Another 10 states now charge $2 to $2.99 in cigarette taxes per pack and 24 states levy a cigarette tax from $1 to $1.99 a pack. Once again, statewide rates may not be the end of the story: An increasing number of cities and counties, as well as the federal government, impose additional taxes on tobacco products.

With gas prices going down and sales taxes and cigarette taxes going up, shoppers and smokers may be inclined to travel to save money, but could end up paying more for the trip.

A Tennessee resident may attempt to save 3 percent in sales tax by crossing the line to Alabama or Georgia – perhaps a $150 savings on a $5,000 purchase. However, that individual will have a (frequently overlooked) use tax liability in Tennessee for the difference.

Wisconsin smokers may be inclined to travel to Minnesota where they can save more than $2 a pack in taxes, and New York smokers may be inclined to head to just about any neighboring states where they can save anywhere from $1.35 per pack or more.

Meanwhile, heading to Alaska to enjoy just an 8-cent-a-gallon gas tax is out of the question for most. However, New Jersey’s gas tax of just 10.5 cents per gallon may be enough of a savings for some drivers in Pennsylvania paying 31.2 cents in gas tax per gallon, while shoppers in New Jersey may be willing to take a drive to Delaware to buy retail purchases without a sales tax.

However, as tempting as these bargains may seem, they could ultimately be more costly.

“While most of us think about sales tax, there also is a use tax. This applies to residents’ out-of-state purchases, and state governments are getting more aggressive in collecting these taxes,” Schibley said. “As more states assess higher and higher taxes on cigarettes, the market for cigarette smuggling also may increase, but many states are cracking down on this. A new federal law also offers states a significant additional enforcement mechanism.”

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access