Top 10 states with the highest sales tax rates in 2026

 

Running a small business is thrilling, but navigating sales tax means crunching numbers and understanding regulations.

You must calculate and charge sales tax for each purchase when your business sells something. The sales tax rates vary by state and by location within the state. While some states only have sales tax at a state level, others also have different rates depending on your city or county, leading to a higher combined sales tax rate.

Sales tax rates vary significantly from state to state. Intuit QuickBooks compiled a list of the 10 states with the highest sales tax rates in 2026.

1. Louisiana

Louisiana currently holds the title for the highest average combined sales tax rate in the nation, at 10.11%. Effective Jan. 1, 2025, the state rate increased to 5% as part of a broader tax overhaul, and this rate is scheduled to remain in place through 2029.

Depending on your parish or city, customers may pay a significant local tax on top of the state rate. In many areas, such as Monroe and parts of New Orleans, the combined rate easily exceeds 10%, with some specific taxing districts reaching as high as 12.5% to 13.5%.

Louisiana also has special local taxes that apply to specific transactions, including hotel occupancy, car rentals, and telecommunications. One of the most unique aspects of the state’s system is its complexity. Rates can vary not just by parish, but by specific shopping centers or economic development districts.

2. Tennessee

Tennessee’s state sales tax is 7.00% but it has one of the highest combined tax rates. The local sales tax rate ranges from 1.5% to 2.75%, with the combined local and state rates reaching 9.75%.

If you have a business in Tennessee, you may have to charge the highest combined sales tax rate, as most counties charge an additional 2.75% on top of the state taxes. However, some goods such as gasoline, textbooks, school meals, and health care products are not subject to sales tax.

A key point of contention in 2026 is the grocery tax. Unlike many neighboring states, Tennessee still taxes groceries at a state rate of 4% plus local taxes. However, new legislative efforts like the “End the Grocery Tax Act” are currently being debated to provide relief to residents.

3. Washington

Washington is often a surprise for business owners because it carries the fourth-highest average combined sales tax rate in the country at 9.51%. While the statewide rate has remained steady at 6.5%, local jurisdictions have been increasingly active in raising rates to fund transit and local services.

In many major hubs, the tax burden is even higher. For example, as of 2026, the minimum combined rate in Seattle is 10.55%. Because Washington does not have a personal income tax, the state relies heavily on these consumption-based taxes and the Business & Occupation (B&O) tax to fund its budget.

Washington has also recently expanded its sales tax base. As of late 2025 and into 2026, several services that were previously exempt (including digital advertising, custom software development, and temporary staffing services) are now subject to retail sales tax, making it a critical area for business compliance.

4. Arkansas

Arkansas currently holds the third-highest average combined sales tax rate in the country at 9.46%. While the state rate is 6.5%, the heavy reliance on local city and county taxes creates significant variation; in some municipalities, the combined total can reach as high as 12.625%.

A major shift for 2026 is the implementation of the Grocery Tax Relief Act. As of Jan. 1, 2026, the state-level sales tax on unprepared food (groceries) has been removed, dropping from its previous reduced rate to 0%. Note that local jurisdictions may still apply their own taxes to these items, so the receipt tax total may not be exactly zero.

For business owners in the agricultural sector, the state launched a new Farmers Sales Tax Exemption Card in January 2026. This card simplifies the process of claiming exemptions at the point of sale for essential items like tractors, seed, and fertilizer, reducing the administrative burden on local producers.

5. Alabama

Alabama ranks high due to aggressive local taxation. While the state rate is just 4%, heavy city and county additions push the average combined rate to 9.46%, with some areas exceeding 11%.

To simplify compliance, out-of-state sellers can use the Simplified Sellers Use Tax (SSUT). This program allows eligible remote businesses to collect a flat 8% tax on all Alabama sales, regardless of the local jurisdiction’s specific rate.

For 2026, Alabama has introduced significant relief on essentials. The state sales tax on groceries dropped to 2% in late 2025. Additionally, a temporary state tax exemption is currently active through 2028 for baby supplies (diapers, formula) and maternity clothing.

6. Oklahoma

Oklahoma climbs into the top 10 with a combined average rate of 9.06%. While the state’s base rate is a relatively low 4.5%, Oklahoma is known for significant local surcharges. In certain municipalities, the combination of city and county taxes can push the total rate as high as 11.5%.

The most significant change for 2026 is the full stabilization of the state’s grocery tax elimination. As of late 2024, Oklahoma eliminated the 4.5% state sales tax on food and food ingredients.

However, much like in Kansas, this relief only applies to the state portion; local jurisdictions still have the authority to levy their full sales tax rates on groceries. Business owners should also note that this exemption does not cover prepared foods, alcoholic beverages, or dietary supplements.

Oklahoma follows a destination-based sourcing rule, meaning sales tax is calculated based on where the product is delivered. For remote sellers, the state maintains a straightforward economic nexus threshold: You must register and collect tax if your taxable sales into the state exceed $100,000 in the current or previous calendar year.

Notably, Oklahoma does not use a transaction count (like the 200-transaction rule) to trigger nexus, simplifying compliance for low-cost, high-volume sellers.

7. California

California holds the highest base state sales tax rate in the country at 7.25%. This base rate is a combination of a 6% state levy and a mandatory 1.25% local rate that supports city and county operations. Because of this high floor, no location in California has a tax rate lower than 7.25%.

Local jurisdictions frequently add district taxes for transportation, public safety, or housing, pushing the average combined rate to 8.99%. In highly populated areas like Los Angeles and Long Beach, the total rate reaches 9.75% to 10.5%, with some specific cities peaking at 11.25%.

A significant update for 2026 is the introduction of the Covered Battery-Embedded (CBE) Waste Recycling Fee. Effective Jan. 1, 2026, retailers must collect a 1.5% fee (capped at $15) on products with nonremovable batteries, such as certain smartphones and small electronics.

Additionally, small businesses in San Francisco may see relief as new local rules have increased the gross receipts tax exemption threshold to $5 million.

8. Illinois

Illinois is a complex state for business owners because it uses a destination-based tax system for most sales. While the base state rate is 6.25%, local additions in cities like Chicago push the combined rate to 10.5%, among the highest in the country.

A major shift for 2026 is the total elimination of the 1% statewide grocery tax as of Jan. 1. However, many municipalities have opted to keep their own 1% local grocery tax to maintain revenue. This means that, depending on the city, you may see a tax decrease on groceries, or the rate may remain exactly the same but be reclassified as a local tax.

Another key 2026 update is the removal of the 200-transaction threshold for economic nexus. Remote sellers now only need to track if they exceed $100,000 in gross retail sales to Illinois customers. If you cross that dollar amount, you are required to collect and remit taxes at the local rate of the delivery address.

9. Kansas

Kansas remains a high-tax state with a combined average rate of 8.78%, though this can fluctuate significantly depending on your specific district. While the state rate is 6.5%, some local areas can see total rates climbing above 11%.

The biggest change for 2026 is the full implementation of the Axe the Food Tax legislation. As of Jan. 1, 2025, the state-level sales tax on groceries (food and food ingredients) was reduced to 0%. It is important to remember that this is a state-level reduction only; cities and counties can still levy their full sales tax rates on a grocery bill.

Kansas is also unique in how it treats digital products. While many states are moving to tax streaming and cloud services, Kansas generally treats software as a service (SaaS) and custom software as exempt. However, if you sell “prewritten” software that is downloaded or delivered on a tangible medium, it remains fully taxable at the combined rate.

10. New York

New York often surprises business owners because while the state rate is a low 4%, local surcharges are significant. The average combined rate sits at 8.54%, but in New York City and surrounding counties, the rate hits 8.875%. This includes a 0.375% surcharge for the Metropolitan Commuter Transportation District (MCTD).

As of 2026, New York continues to treat SaaS and prewritten software as taxable tangible property. However, it’s one of the few high-tax states where most digital goods, like e-books or streamed music, are tax-exempt unless you sell them in tangible form.

New York is also famous for its “clothing threshold.” Clothing and footwear sold for less than $110 per item are exempt from the 4% state tax year-round. While many counties follow this lead, some still collect their local portion of the tax on these items, so it’s vital to check the specific jurisdiction.

Find peace of mind come tax time

After looking at the 10 states with the highest sales tax rates, you can see that sales tax rates vary widely across the U.S. To ensure your business stays compliant with sales tax laws, review the regulations in your area, apply for a sales tax license, and file them on time.

This story was produced by Intuit QuickBooks and reviewed and distributed by Stacker.