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Residents of California deal with high sales taxes, shipping fees and long delivery times.
The five best states for shoppers to live in if they want the most favorable combination of low sales taxes and good shipping deals on online orders are Delaware, Mississippi, New Hampshire, West Virginia and Oregon, according to a study by Extrabux.com, a comparison shopping and coupon site.
By the same measure, the five worst states are Hawaii, Alaska, California, New York and Washington.
“After analyzing each state’s online sales tax incongruities along with the varying shipping times and costs, we are moving to Delaware,” quips Jeff Nobbs, co-founder of Extrabux.
Extrabux, which features products and coupons for 1,500 online retailers, including about 350 of those listed in the Internet Retailer Top 500 Guide, has compiled data on each retailer’s distribution facilities, estimating both the average delivery time and shipping cost based on the ZIP codes of their fulfillment locations, including drop-shipping facilities of retailers’ suppliers. Extrabux gets this information directly from the retailers, either through calls to their offices or by gathering public information from their web sites, Nobbs says.
Extrabux uses an outside service to compile the average sales tax rate for each state and the District of Columbia. Four states—Delaware, Montana, Oregon, and New Hampshire—do not have a sales tax. It then multiplies those average rates by the percentage of the 1,500 retailers that collect sales tax in each state, producing what Nobbs calls a “standardized tax rate”—a combination of a state’s average sales tax and the likelihood that a consumer will have to pay the tax on a given online purchase.
Extrabux groups states into four ranges of these standardized tax rates, which range from 0-0.9% to 2.5-4.5%.
It considers where a state falls within these ranges, as well as the average time and cost of shipping, to determine how well each state ranks overall as a good place to live and shop online.
The formula produces a win for a state like Delaware, which has no sales tax, is a small state by geographic size and is located in a highly populated region of the country that is close to many distribution centers.
Hawaii is at the other extreme. Although it has a relatively low average sales tax of 4.25%, it has the longest average shipping time of 4.5 days and shares with Alaska the highest average shipping cost of $19.17.
California also scores low on the Extrabux list because of several interlinking factors. In addition to having a relatively high average sales tax and a long shipping time from the large number of distribution centers located on the East Coast and in the Midwest, California also contains a high number of stores, distribution centers and other physical facilities that require online retailers to collect sales tax from California residents, Nobbs says. Under federal law, retailers are only required to collect sales tax in states where they maintain physical operations like stores and distribution centers.
“About 50% of online retailers charge sales tax to California residents, which is more than in any other state,” Nobbs says in a recent blog posting. “Combine that with an average sales tax of 8.96% (second highest) and you’re looking at an additional 4.5% in sales tax costs, on average. In addition, Californians wait four to five days for shipments coming from an East Coast distribution center.”
Mississippi, on the other hand, scores high on the Extrabux list as an ideal state for online shoppers because, even though it has a 7% average sales tax, only 5% of the retailers in the Extrabux survey collect sales tax in Mississippi, putting the state in the lowest category of standardized tax rates. And because the state is relatively close to East Coast distribution centers, it has an average shipping time of 3.24 days and an average shipping cost of $4.14.
Shipping times for all 50 states range from 2.55 days for Illinois to 4.5 days for Hawaii, while average shipping costs range from $4.04 for Illinois to $19.17 for Alaska and Hawaii. The Extrabux study figures shipping times as the period when an order is in transit between a retailer’s fulfillment center and the customer’s address.
Among the 45 states with sales tax, the lowest is Alaska at 1.7%; the highest is Tennessee at 9.46%, according to Extrabux’s data. Alaska has no statewide sales tax, so its average sales tax is based on an average of the sales tax charged in its major metropolitan areas.
Following are the averages of sales tax rates, shipping times and shipping costs for all 50 states and the District of Columbia, according to Extrabux:
Alabama, 8.07%, 2.83, $4.08
Alaska, 1.7%, 4.05, $19.17
Arizona, 8.68%, 3.40, $4.16
Arkansas, 8.04%, 3.19, $4.13
California, 8.96%, 3.54, $4.18
Colorado, 6.40%, 3.10, $4.12
Connecticut, 6.00%, 3.31, $4.15
Delaware, 0.00%, 2.74, $4.07
District of Columbia, 6.00%, 2.73, $4.07
Florida, 6.69%, 3.21, $4.14
Georgia, 6.98%, 3.00, $4.11
Hawaii, 4.25%, 4.10, $19.17
Idaho, 6.04%, 3.86, $4.23
Illinois, 7.21%, 2.55, $4.04
Indiana, 7.00%, 2.64, $4.05
Iowa, 6.89%, 2.98, $4.10
Kansas, 7.78%, 3.02, $4.11
Kentucky, 6.00%, 2.60, $4.05
Louisiana, 8.63%, 3.24, $4.14
Maine, 5.00%, 3.62, $4.19
Massachusetts, 6.25%, 3.21, $4.14
Maryland, 6.00%, 2.88, $4.09
Michigan, 6.00%, 2.77, $4.07
Minnesota, 7.03%, 3.10, $4.12
Mississippi, 7.00%, 3.24, $4.14
Missouri, 6.93%, 3.00, $4.11
Montana, 0.00%, 3.91, $4.24
Nebraska, 6.09%, 3.19, $4.13
Nevada, 7.69%, 3.56, $4.19
New Hampshire, 0.00%, 3.52, $4.18
New Jersey, 7.00%, 2.95, $4.10
New Mexico, 6.75%, 3.50, $4.18
New York, 8.16%, 2.95, $4.10
North Carolina, 7.83%, 2.88, $4.09
North Dakota, 5.61%, 3.54, $4.18
Ohio, 6.78%, 2.63, $4.05
Oklahoma, 8.27%, 3.22, $4.14
Oregon, 0.00%, 3.80, $4.22
Pennsylvania, 6.14%, 2.74, $4.07
Rhode Island, 7.00%, 3.37, $4.16
South Carolina, 7.06%, 2.90, $4.09
South Dakota, 5.22%, 3.49, $4.18
Tennessee, 9.46%, 2.80, $4.08
Texas, 7.81%, 3.07, $4.12
Utah, 6.44%, 3.64, $4.20
Vermont, 6.05%, 3.40, $4.16
Virginia, 5.00%, 2.83, $4.08
Washington, 8.45%, 4.00, $4.25
West Virginia, 6.00%, 2.72, $4.06
Wisconsin, 5.44%, 3.03, $4.11
Wyoming, 5.26%, 3.07, $4.12