Running a small business in 2026 means keeping a close eye on sales‑tax obligations, especially as several states push combined rates higher than 10%. While the federal government remains hands‑off on consumption taxes, state and local officials are using sales‑tax revenue to fund critical services and infrastructure, a strategy that aligns with responsible stewardship of taxpayer dollars.

Louisiana tops the list

Louisiana now has the nation’s highest average combined sales‑tax rate at 10.11%. The state‑level rate rose to 5% on Jan. 1, 2025 as part of a broader tax overhaul and will stay in place through 2029. Local jurisdictions—parishes and cities—add further taxes, pushing many areas, including parts of New Orleans, above 12%.

Special local taxes also apply to hotel occupancy, car rentals and telecommunications, making compliance a bit more complex but also providing vital revenue for tourism‑related projects and local services.

Tennessee’s high combined rate and grocery‑tax debate

Tennessee’s state rate is 7.00%, but local additions of 1.5%‑2.75% bring the combined rate to 9.75% in many counties. The state still taxes groceries at a 4% rate plus local taxes, prompting lawmakers to consider the “End the Grocery Tax Act” for relief.

Despite the higher burden, Tennessee exempts gasoline, textbooks, school meals and health‑care products, reflecting a balanced approach that protects essential goods while funding transportation and public‑safety needs.

Washington’s consumption‑based model

Washington ranks fourth with an average combined rate of 9.51%. The statewide rate remains steady at 6.5%, but local jurisdictions have been raising rates to fund transit and other services. Seattle’s minimum combined rate is now 10.55%.

Because Washington lacks a personal income tax, it relies heavily on sales‑tax revenue and the Business & Occupation (B&O) tax. Recent expansions now tax digital advertising, custom software development and temporary staffing services, underscoring the state’s commitment to modernizing its tax base.

Arkansas, Alabama and Oklahoma offer mixed pictures

Arkansas holds the third‑highest average combined rate at 9.46%. While the state rate is 6.5%, local taxes can push totals to 12.625% in some municipalities. A new Grocery Tax Relief Act eliminated the state grocery tax on unprepared food as of Jan. 1, 2026, though local taxes may still apply.

Alabama’s state rate is only 4%, but aggressive local taxes lift the average combined rate to 9.46%, with some areas exceeding 11%. The Simplified Sellers Use Tax (SSUT) lets out‑of‑state sellers collect a flat 8% rate, simplifying compliance for remote businesses. Recent relief measures reduced the grocery tax to 2% and introduced a temporary exemption for baby supplies and maternity clothing through 2028.

Oklahoma’s combined average is 9.06%. After eliminating the 4.5% state grocery tax in late 2024, local jurisdictions can still levy taxes on groceries, keeping the overall burden moderate. The state’s destination‑based sourcing rule and a $100,000 economic‑nexus threshold make remote‑seller compliance straightforward.

California and Illinois: High bases, targeted relief

California’s base rate of 7.25% (6% state + 1.25% mandatory local) guarantees no location falls below that level. Local district taxes raise the average combined rate to 8.99%, with major metros reaching up to 11.25%. A new 1.5% battery‑recycling fee on products with non‑removable batteries took effect Jan. 1, 2026.

Illinois’ base rate is 6.25%, but Chicago and other cities push combined rates to 10.5%. The state eliminated its 1% grocery tax on Jan. 1, 2026, though many municipalities retain a 1% local grocery tax.

Key takeaways for small‑business owners

• Check both state and local rates; combined totals can differ dramatically within a single state.
• Watch for recent legislative changes—grocery‑tax eliminations, new service taxes, and simplified remote‑seller rules can affect your filing obligations.
• Consider using tax‑automation tools or consulting a qualified CPA to stay compliant across multiple jurisdictions.
• Remember that higher sales‑tax rates often fund essential services like transit, public safety and infrastructure, supporting the communities where your business operates.

Staying informed about these evolving rates helps small‑business owners protect their margins while contributing responsibly to the local economies that sustain them.

Original reporting: KRDO (Colorado Springs metro) — read the source article.