Report: Alaska ranks in bottom 10 of states for low sales taxes

(The Center Square) – Alaska does not have a statewide sales tax but allows local sales taxes, unlike other states with no sales tax, according to a report from the Tax Foundation.

Delaware, Montana, New Hampshire and Oregon do not have local sales taxes and are tied for the lowest combined sales taxes in the country, according to the State and Local Sales Tax Rates, Midyear 2024 report.

Alaska ranks 46th for its combined rate of 1.821%. Local governments can implement sales taxes up to 7%, according to the Alaska Office of the State Assessor.

Sales taxes range from 2% to 5%, and 117 of Alaska’s 165 local governments have one, according to the assessor’s office.

Alaska also does not have a state income tax, but its high corporate taxes make it less friendly for businesses, according to a report by the Tax Foundation last year.

The state ranked 26th in that report for corporate taxes, which are 9.4%.

Gov. Mike Dunleavy proposed a tax break during the 2024 legislative session that would have allowed corporations to deduct up to 50% for childcare, electricity, housing and food against its corporate income tax. The governor said Alaska’s cost of living is among the highest in the country.

“The areas of childcare, housing, energy and food are the greatest expenses for most families,” Dunleavy said. “The private sector is far more equipped to solve these challenges than the government. The Alaska Affordability Act will be a catalyst that sets in motion voluntary development by the private sector that will make Alaska an even better place to live and raise a family.”

Senate Bill 237 would have impacted state revenues by $237.6 million, according to the bill’s fiscal note. The bill did not make it out of the Senate.

Sales taxes are just one component of a state’s tax structure and should be viewed in context with other taxes, according to the Tax Foundation.

“For example, Tennessee has high sales taxes but no income tax, whereas Oregon has no sales tax but high income taxes,” the organization said in its report. “While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.”