Our States, Their Sales and Your SALT

 

“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” -Vince Lombardi

WARNING: What I’m about to share might make you salty.

The topic is state and local taxes (SALT … ba dum, ching), and if there’s any condolence … it’s that nobody is exempt from paying their part.

But where exactly do your SALT dollars go?

With the Tax Cuts and Jobs Act (TCJA), answering that question got a little trickier this year. In short, SALT includes income taxes from taxing jurisdictions as well as real estate and personal property taxes. Where the TCJA altered things was its limiting of the amount which is potentially deductible from federal tax returns.

Let’s take a look at some more SALT ramifications. (Other than high blood pressure, that is. 🙂 Okay, I’ll quit the salt puns now. Maybe.)

Higher Price to Purchase

Paying sales tax has become so woven into our economic fabric that we hardly recognize it on a day-to-day basis.

But states depend heavily on sales tax to make it through the year (see list below of which states truly rely on sales tax). The revenue generated plays a foundational role in the maintenance of cities, counties, schools and other initiatives within the state.

Do you like the state you live in? I hope so. Most every purchase you make goes toward its cause(s).

The Few and the Proud

However, if you live in one of the five states that doesn’t apply a statewide sales tax — Alaska, New Hampshire, Montana, Delaware, Oregon — there are some other laws that apply to you.

In Montana, tourist-heavy populations can add up to 3% sales tax on their goods sold. Delaware (yes Delaware) is often called a “tax shelter” because of its individual tax laws, but businesses do pay more via gross receipts tax. New Hampshire will add a 9% sales tax to hotel rooms, rental cars and restaurant meals, but is otherwise (mostly) sales tax-free so that you can “Live Free or Die”. Neither Alaska nor Oregon collect sales tax either, but all is subject to change through the vote.

Top Ten Taxed for Sales

The list below is the percentage, in state revenue, comprised of total sales tax collections by state. Although Washington doesn’t collect corporate or individual income tax, they lead this sales tax charge with 46.4% of state revenue coming from sales tax.

Also, note the more “touristy” locations — Vegas, Mardi Gras, Nashville, Maui — embedded into this list. Going on vacation to any of these locations soon? Be on the lookout for extra pennies (and dollars) to pay.

  1. Washington 46.4 percent
  2. Tennessee 41.5 percent
  3. Louisiana 41 percent
  4. South Dakota 39.6 percent
  5. Nevada 39.4 percent
  6. Arizona 38.7 percent
  7. New Mexico 37.8 percent
  8. Arkansas 37.5 percent
  9. Hawaii 37.2 percent
  10. Texas 35.4 percent

It’s a Catch 22, right? Do you want to pay extra for a better place to live, or pay less for the things only you need?

And if you’d like to schedule a meeting for us in Hawaii, go ahead and buy us some plane tickets. I’d be quite happy to cover the sales tax. 🙂

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