State line reflects tax split

Using sales tax data from every ZIP code in the country, a nonpartisan think tank says Washington’s overall sales tax rate is fourth-highest in the country.

That number reflects both the statewide rate of 6.5 percent and the average local rate of 2.29 percent for all counties in Washington, said Scott Drenkard, an economist with the Tax Foundation, a Washington, D.C., research group that’s monitored tax data since 1937.

Idaho, which unlike Washington has an individual income tax, ranked 36th for overall sales tax rates, according to the foundation.

Spokane County has a local sales tax rate at either 1.6 percent or 2.2 percent, depending on city of purchase.

The study, published Tuesday, noted that city, county and municipal sales tax rates vary widely, reflecting different local tax policies.

To obtain useful local numbers, Drenkard used ZIP codes along with 2010 census numbers to produce tax rate averages weighted by population.

Thirty-four states, including Washington and Idaho, have local sales tax rates. The study shows that Washington’s local rates are 11th-highest in the nation.

Idaho’s average local rate of .02 percent is the second-lowest among states that have local rates.

The foundation study also noted five states don’t have statewide sales taxes.

Drenkard noted sales taxes are the most transparent of all state-based revenue sources, but he said the study should be seen in context, because it doesn’t address two other ways to measure: by overall tax burden and by state business tax rates.

Drenkard said the sales tax rankings are not apples-to-apples comparisons, since some states have different categories of products and services that are taxed.

For instance, in some states groceries are taxed at rates different from other products or not at all. Clothing is another variable category.

“While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts,” Drenkard said.

The foundation does the analysis twice a year. Since many states are avoiding large sales tax adjustments during a bad economy, the relative rankings haven’t changed much in recent years. Only three states have made major changes since 2010: California and Connecticut raised rates, while North Carolina dropped its rate 1 percentage point.

In 2010 Washington had the fifth-highest overall sales tax. Idaho was 32nd that year.

In the 2012 study the states with sales tax rates higher than Washington’s are Tennessee, Arizona and Louisiana.

The foundation also issues an annual business tax climate index, in which Washington ranks seventh overall and Idaho ranks 21st.