What is a Local Option Sales Tax / Special District?
A local option sales tax is a municipal sales tax administered by a local government body, often a county or city. Local option sales taxes can also be administered by local transportation districts, school districts, recreation districts, and other special local government divisions.
Traditionally, municipal governments rely on personal property taxes for the majority of their tax revenue. However, local option sales taxes account for a bit over 11% of all municipal tax revenue nationwide. In certain states, especially in the south, municipal governments are more reliant on sales taxes for revenue and thus levy higher local-option tax rates.
How many states allow local option taxes?
In the United States, a total of thirty-seven states allow local governments to collect some form of local sales tax. In all of these states with the exception of Alaska, these local option taxes are in addition to a statewide sales tax collected by the state's Department of Revenue.
You can find a list of states that allow local taxes, as well as the average tax levied by municipalities in that state, below our interactive sales tax map of the United States. This map clearly shows how states in the southern and western portions of the USA have higher local sales tax rates.
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"Baked-In" Local Sales Tax Rates
Note that in some states, the statewide sales tax rate includes a portion that is earmarked for distribution to local governments. We do not consider these taxes to be "local option sales taxes", as the local government does not have any say in the rate's calculation.
- California and Virginia both mandate and collect a 1 percent "local rate" that we list here as part of the state rate because localities do not have the authority to change it.
- In Utah, the state mandates a 1.25 percent "local" add-on rate. Because localities do not have the authority to amend it, we list it here as part of the state rate.
Highest Local Option Sales Tax Rates
Cities in Arkansas, Illinois, and Louisiana have the dubious distinction of collecting the highest local option sales tax rates in the country, with the combined tax rates in many of these cities topping 11%. To learn more, see our interactive list of the highest-taxed cities in America.
Special Districts - Where Sales Taxes Get (Even More) Confusing
As you'll quickly notice as you browse our sales tax rate directory, local sales taxes aren't all nearly broken down into taxes collected by counties and cities. In fact, one of the most common vehicles used to charge local sales taxes in the special district - a region created specifically to administer a local tax, often earmarked for a specific purpose like building a stadium or supporting a government program. These special districts don't have to follow regular city / county borders, and in fact they rarely do.
Because of the staggering amount of special districts that exist around the country, and the non-standard ways that thir borders are determined, they vastly increase the complexity of dealing with local taxes. In this humerous but highly educational clip, John Oliver covers special districts and some of the controversy that surrounds them. We highly recommend it!
Sales Tax Rates Database: Need an updated list of local sales tax rates for your business? Download our sales tax database!