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Retail sales taxes are one of the more transparent ways to collect tax revenue. Sales taxes are easier to understand and consumers can see their tax burden printed directly on their receipts.

45 states and Washington, D.C. collect statewide sales taxes, while local sales taxes are collected in 38 states.

According to the Tax Foundation, states with the highest average combined state and local sales tax rates:

—Tennessee (9.47%)

—Louisiana (9.45%)

—Arkansas (9.43%)

—Washington (9.17%)

—Alabama (9.14%)

Sales tax rate differentials can induce consumers to shop across borders or buy products online and businesses to locate outside the borders of high sales-tax areas to avoid being subjected to their rates. 

A stark example of this occurs in New England, where per capita sales in border counties in sales tax-free New Hampshire have tripled since the late 1950s, while per capita sales in border counties in Vermont have remained stagnant.

But sales tax rates are only half the equation. Sales tax bases also impact how much revenue is collected from a tax and how the tax affects the economy.