How Broad Are State Sales Tax Bases?

Brief

How Broad Are State Sales Tax Bases?

Abstract

This chartbook compares the breadth of general sales and excise tax bases across the states. It categorizes detailed personal consumption expenditures (as measured in the Bureau of Economic Analysis National Income and Products Accounts) by their tax treatment in each state and the District of Columbia. It shows that there is substantial variation across states in the share of the potential tax base covered by state general and selective sales tax, ranging from 36 percent in Vermont to 75 percent in New Mexico and 91 percent in Hawaii. Then, focusing particularly on service expenditures, it shows (1) household expenditures on services are a large and growing share of total personal consumption expenditures and (2) general sales and excise taxes in most states either exclude or exempt most services from tax, but (3) because spending on services is such a large portion of total household expenditures, services nonetheless account for a significant portion of state sales and excise tax bases.

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