The ITEP Guide to State & Local Taxes
Sales & Excise
How Do States Tax Cannabis?
A growing number of states are legalizing and taxing cannabis. Cannabis taxes are raising revenue for education, health care, and addressing substance abuse while encouraging consumers to moderate their use. But high cannabis taxes also mean that low-income communities previously targeted for enforcement now pay a disproportionate share of tax.
How Do State and Local Excise Taxes Work?
Excise taxes are sales taxes that apply to specific goods (such as gasoline, tobacco, or alcohol) or services (such as hotel and car rentals). Sometimes it’s appropriate to ask consumers of a particular item to pay an especially high tax for various reasons. But even in those circumstances, many excise taxes are highly regressive.
What’s Exempt from State and Local Sales Taxes?
State and local sales taxes are typically conceived as broad-based consumption taxes – that is, taxes on most things consumers buy. In practice, many purchases are exempt from sales taxes.
How Do State and Local Sales Taxes Work?
Sales taxes are the second largest source of revenue for state and local governments. In nearly every state they are an important way we pay for public education, health care, public safety, and other services. But they are also typically the costliest tax for low-income families.
Institute on Taxation
and Economic Policy
ITEP is a non-profit, non-partisan tax policy organization. We conduct rigorous analyses of tax and economic proposals and provide data-driven recommendations to shape equitable and sustainable tax systems.
Subscribe to ITEP Emails
Tax research and policy news in your inbox.
Promote Fair Tax Policy
Your gift to ITEP promotes tax justice. With your help, we do research that supports taxing millionaires and billionaires, taxing big corporations and raising revenue for the things our people, our communities and our planet need.
Together, we can create a country with more economic justice, more racial justice, more climate justice… and more tax justice.