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Study: Arkansas has third highest local/state sales tax in the country

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(The Center Square) – Arkansas has the third highest sales tax in the country at 9.47%, second only to Louisiana and Tennessee, according to an analysis by the Tax Foundation of mid-year sales tax rates.

The state sales tax rate is 6.50%, ninth in the country. The average local sales tax rate is 2.969%, according to the report.

Arkansas’ neighbors all rank in the top 15 for high sales taxes, with the exception of Mississippi, which has a combined ranking of 22nd. However, Mississippi is tied for the second spot for the highest state sales tax with Tennessee, Rhode Island and Indiana at 7%. The Magnolia state’s local sales taxes average 0.62%, driving its ranking down.

Louisiana’s state sales tax is 4.45%. The average local sales tax rate of 5.115% drives Louisiana to the top for high combined sales taxes.

Tennessee, which claimed the second spot, has an average local sales tax of 2.556%, according to the data.

Other border states have lower combined rates. Missouri’s is 8.386%, of which 4.161% is the average local sales tax rate. Oklahoma has a combined sales tax rate of 9%, which is sixth in the country.

Texas’ rate of 8.2% is 14th in the country, according to the analysis.

Taxpayers are likely to avoid high sales taxes if they are close to a state where they are lower, according to the Tax Foundation.

“Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs,” the Tax Foundation said in its report. “For example, evidence suggests that Chicago-area consumers make major purchases in surrounding suburbs or online to avoid Chicago’s 10.25% sales tax rate.”

The Tax Foundation advised states to tread carefully when considering their tax rate.

“State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate,” the organization said in its report.

The state sales tax rates have stagnated since South Dakota slashed its sales tax rate from 4.5% to 4.2% in 2023. The rate rolls back in 2026.

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