(The Center Square) – Seattle and Tacoma took the top two spots in the Tax Foundation’s latest publication on the highest combined state and local sales tax rates among major U.S. cities.
Earlier this week, the Washington, D.C.-based think tank released its “Sales Tax Rates in Major Cities, Midyear 2024” report, which calculates “average combined state and local sales tax rates by state, using zip code-level sales tax and population data.”
The Tax Foundation defines major U.S. cities as “Census-designated incorporated places with populations over 200,000.”
“Sales tax avoidance is most likely to occur in areas where there is a significant difference between two jurisdictions’ sales tax rates,” Tax Foundation Vice President of State Projects Jared Walczak said in a news release. “Leading research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas.”
It’s commonplace for Washington residents to shop in Oregon, which does not have retail sales taxes. Groceries, alcohol, clothing and other items tend to be cheaper on the Oregon side of the border. Due to the sales tax difference, Washingtonians can save even more on items such as appliances, furniture and electronics.
Seattle in King County and Tacoma in Pierce County figure prominently early on in the report.
“Among major cities, Seattle, Washington, claims the dubious distinction of imposing the highest combined state and local sales tax rate, at 10.35 percent,” the report states.
Washington state has a sales tax of 6.5%, and the Emerald City imposes a 3.85% sales tax, for an overall 10.35% rate.
“The city eclipsed Tacoma, Washington, at 10.3 percent, in April, when King County (in which Seattle is situated) adopted a 0.1 percent additional sales tax to generate additional funding for nonprofits providing cultural programming,” the report goes on to note. “Tacoma’s current rate dates to 2021.”
The Center Square reached out to Mark Harmsworth, director of the Center for Small Business at the Washington Policy Center think tank, for his thoughts on two Washington cities topping the list of major cities with the highest combined state and local sales tax rates.
Taxpayers in some smaller cities get hit even harder, he pointed out.
“Ironically, the highest sales tax rate [in the state] is shared with my own city, Mill Creek, and Lynnwood – 10.6%,” Harmsworth noted in an email to The Center Square. “High sales tax rates certainly create a problem not just for retailers, but for service providers, who are subject to the same rate providing services, even remotely in some cases. A high rate drives businesses to locate in other locations.”
Mill Creek is a city of nearly 21,000 people approximately 20 miles northeast of Seattle. Lynwood, with a population of more than 43,000, is part of the Seattle metropolitan and is located 16 miles north of Seattle. Both cities are located in Snohomish County.
“I would predict the rates in Washington would be much higher if it wasn’t for the restrictions on the amount municipalities can raise taxes described in state law (RCW 35.102),” Harmsworth concluded.
Chicago, Ill., and three cities in California – Long Beach, Fremont and Oakland – tied for the third-highest combined state and major city sales tax rates at 10.25%.