John Minassian

U.S. Cities Increasing Sales Taxes in Record Fashion

Over 450 cities increase sales taxes in 2007.

May 22, 2008
by John Minassian

According to the recently released Vertex Sales Tax Rate Report, 485 U.S. cities increased their sales tax rate in 2007, representing the largest annual expansion in the number of cities that either increased their existing rates or initiated sales taxes in the past four years.

Last year, 178 cities nationwide initiated new city tax rates, while 307 cities increased their pre-existing sales tax rates. Of these, North Courtland, Ala., had the largest increase, to a four percent sales tax rate from one percent. Seldovia, Alaska experienced the second largest increase to 4.5 percent from two percent. Fredonia, Ariz. and Watts, Okla. followed, doubling to four percent from two percent.

Several large U.S. cities also raised their sales tax rates in 2007 — Boulder, Colo.; Phoenix, Ariz.; St. Louis, Mo.; Denver, Colo. and Seattle, Wash. — all increased rates between 0.1 percent and 0.2 percent.

The report also found that:

  • Colorado, Missouri, Texas and Washington experienced the highest number of city rate increases.
  • Only one state, South Carolina, raised its state-wide sales tax rate.
  • Catawba Indian Reservation, South Carolina and Wrangell, Alaska have the highest city sales tax rate at 7.0 percent.

Overall, the report found that 2007 sales tax rates remained higher than any previous year among those cities increasing an existing rate, illustrating an overall steady growth in the combined state, county and city average rates since 1981 (the year in which Vertex first began tracking data). However, the average U.S. sales tax rate among all taxing cities decreased slightly, from 8.579 percent in 2006 to 8.573 percent in 2007, the result of cities initiating lower rates on first-time taxes.

With more than 450 cities raising sales tax rates last year many local governments see sales tax revenue as a viable part of the solution in addressing revenue shortfalls. It is especially critical for corporate taxpayers to stay abreast of these sales tax rate adjustments and keep close records of all their transactions in order to remain in compliance and be prepared for potential state audits.

Rate this article 5 (excellent) to 1 (poor).
Send your responses here.

John Minassian is Vice President of Tax Research, Vertex, Inc. Over the last 30 years Minassian has held various jobs in the management of the accounting, finance and tax functions of large multinational companies including E.I. DuPont de Nemours, ICI Americas and AMP Inc. (now Tyco Electronics). He did his undergraduate work at the University of Pennsylvania, earned an MBA from Drexel University and his Masters in Taxation from Villanova University.

About Vertex Inc.
With nearly 30 years of experience, Vertex Inc. is the leading provider of advanced tax technology solutions, delivering products and process management services to customers worldwide. Vertex solutions help companies streamline tax compliance processes and leverage information to discover new strategic tax savings. In addition, they enhance decision information across every major line of business tax, including income, sales, consumer use, value added, communications and payroll. To serve its customers, Vertex works in partnership with the world's leading providers of ERP software and related services.

Founded in 1978, Vertex is a privately held company that employs over 600 professionals at its headquarters in the U.S. (Berwyn, PA) and Europe (London) and its offices in Atlanta, Dallas, Phoenix, Sarasota and Washington, DC.
For more information about Vertex, visit our Web site at vertexinc.com.