Yes, there are Sales Taxes, and the Impact on Holiday Shopping is Real

Tara Segee
November 23, 2020

How much can I expect to spend on holiday shopping this year? Well, that may depend on where you live and shop. You see, your location can play a huge role in dictating the final price of an item. This is due to the fluctuation in sales tax rates across the country at both the state and local levels. These varying levels of taxes can often leave shoppers with a case of sticker shock when they see the final cost of that perfect item they’ve been searching for.

But the rates can’t really fluctuate all that much, can they? Funny you should ask. Let’s look at how rates can change and impact total costs through the eyes of a generous holiday shopper. We’ll call him Walshie to protect his identity.  

Walshie, now retired, spends his winter months riding ski patrol at Gunstock Mountain in Gilford, New Hampshire. This works out great when buying Christmas presents for his family. There’s no sales tax in New Hampshire and the sticker price is the final price. How great is that?

However, on a recent vacation to Winter Park, Colorado he’s shocked by the amount of sales tax he pays on almost everything he’s buying. Here, the total sales tax rate there amounts to 11.2% of all purchases and 7% of that is just city tax. You can only imagine his surprise when he discovers the final cost.

When he returns home to New Hampshire still stinging from his vacation costing much more than anticipated due to unforeseen taxes, he complains to his friend Antonio who lives in River Grove, Illinois. However, he’ll get no sympathy from his pal Tony. River Grove, in Cook County, IL has a combined sales tax of 11%. The use tax rate there is currently the 6.25% for the state rate only, but it looks like Illinois is about to make some significant changes come January 1st so stay tuned on that one.

Ok, thanks to our friend Walshie you probably get the idea by now that sales tax rates can change when you move state to state and it’s probably something you should consider when booking your next vacation. But it’s even more complicated than that. Did you know that if you visited Laguna Beach in CA and dropped $20 on a souvenir snow globe that you would pay 7.75% sales tax, but an hour north in Burbank, you would pay 10.25% tax on the exact same item? Yes, taxes can vary within the same state depending on which city and county you are in. In some cases, you can even be charged different rates on the same item within the same city limits if that city is included in two different counties. Atlanta is an example of this as it sits in both Fulton and DeKalb counties.

And if all of this wasn’t enough, be prepared for some varying tax rates within the same store. Our friend Chuck at the office likes to bake for all his colleagues. On his recent trip there to buy his supplies he was surprised to learn that while his ingredients were tax exempt, Massachusetts wanted their 6.25% for those foil pans he’ll be baking those ingredients in. As another famous Chuck once said, “good grief.”

This blog was a light-hearted way to illustrate a very real and complex situation. Sales taxes are complicated, they vary greatly from state to state and by county, city and town. Knowing what is taxed and where might be the best decision you can make this holiday season.

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Author

Tara Segee

Tara Segee is a Regulatory Analysis Manager at Sovos. Tara has over 20 years of experience with tax technology and an in-depth understanding of sales and use taxes. Tara leads a team of specialists whose main focus is researching, analyzing and implementing changes to indirect taxes, tax reporting information and returns. Tara earned her Bachelor’s degree from Salem State University.
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