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Why do sales tax rates vary by county?

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Quick Answer

Sales tax rates vary by county because each of these jurisdictions uses disparate methods to determine taxability, explains Avalara. For instance, while Chautauqua, Columbia and Chenanga counties of New York State exempt general clothing selling for less than $110 from sales tax, comparable jurisdictions in the state lack similar exceptions.

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Full Answer

Forty-five states and the District of Columbia impose a general sales tax on virtually all goods and, in some cases, select services, explains the Tax Policy Center. Additionally, municipalities, special districts and counties in 36 states are allowed to impose supplementary sales taxes. This arrangement results in remarkably disparate taxation levels. For instance, in 2008, the combined local and sales tax rates for some jurisdictions in Alabama was 13.73 percent, while the rate for comparable localities in Hawaii was 4.5 percent.

Variations in sales taxes are also arise from exemptions, known as tax holidays, introduced at select periods of the year, explains Avalara. For instance, Virginia excepts choir robes, corsets, beach wear and steel-toed boots at certain times of the year. Similarly, Texas exempts school clothing and associated supplies on the first day that school districts start classes. In 2014, Maryland had a tax holiday on certain days in August for clothing and shoes selling for less than $100, while North Carolina had a three-day exemption for clothing priced at $100 or less. Tax holidays are generally intended to stimulate local economies.

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