Puerto Rico and the state of Kansas implemented the most significant sales tax rate increases in 2015, according to the annual sales tax rate study released Wednesday by corporate tax solutions provider Vertex Inc.
Unlike 2014, which had no significant state sales tax increases, 2015 saw two significant increases: effective July 1, 2015, Kansas’ rate went from 6.150 percent to 6.5 percent, and Puerto Rico’s rate increased from 6 percent to 10.5 percent, making it the highest across the United States.
In all, the number of sales and use tax rate changes in the U.S. for 2015 was 612, up from both 2013 and 2014, which had 611 and 492 changes, respectively.
“It is significant that both Kansas and Puerto Rico raised sales tax rates in 2015,” said John Minassian, vice president of tax content development at Vertex. “Both jurisdictions have considerable budget shortfalls; sales tax increases and income tax schedule adjustments are attempts to generate additional revenue in 2016.”
Kansas attempted to cut its income tax in prior years, creating a serious budget issue. Puerto Rico is suffering from a debt crisis due to exceeding budgets over a period of years while its economy contracted — increased tax revenues will be a step in the right direction to help service the debt incurred, which is now in default, the company said.
In addition to the sales tax increase, Puerto Rico instituted a 4 percent tax on professional services, effective Oct. 1, 2015.
“But the biggest news is that on April 1, 2016, Puerto Rico will implement a 10.5 percent value-added tax, which applies to both taxable goods and services. This is momentous since it represents the first VAT to date in any U.S. territory or possession,” Minassian said.
Notable statistics from the Vertex 2015 Sales Tax Rate Report include:
- Puerto Rico has the highest state sales tax rate at 10.5 percent. Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee have the second highest state sales tax rate, at 7 percent.
- Kodiak, Alaska, Wrangell, Alaska, and Winter Park, Colorado have the highest city sales tax rate at 7 percent. The Alaskan cities of Hoonah and Selawik have the second highest sales tax rate of 6.5 percent.
- Tuba City (including the surrounding areas that are part of the To’Nanees’Dizi Local Government), in Coconino County, Arizona, has the highest combined sales tax rate of 12.9 percent.
- Since 2006, there have been 2,197 new sales and use taxes, an average of 219 per year.
- Since 2006, there have been 4,058 sales and use tax changes, an average of 405 per year.
- The combined number of new and changed sales and use tax rates since 2006 is 6,255, an average of 625 per year.