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Big Sky's sales tax: what's 3 percent?

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By Amy Smit
Big Sky Resort tax staff

During a recent visit to upstate
New York, I was shocked to see an 8
percent sales tax rate on my receipt.
I decided to investigate how Big
Sky’s 3 percent resort tax compares
to tax rates nationwide.
Montana doesn’t have a statewide
sales tax, but has approved eight
localities to collect what’s known as
a resort tax.
As one of these designated resort
areas, Big Sky collects a 3 percent
resort tax on some goods and services.
Under Montana code, medical
supplies, appliances, hardware, and
items deemed the “necessities of
life” are exempt from the tax. The
resort tax is imposed to assist our
community with high tourist traffic
and a low population. Without
it, residents would bear the brunt
of the cost of local infrastructure,
tourism development and emergency
Sales tax rates vary greatly across
the U.S. Most states collect a state
tax, and 33 of them allow localoption
sales taxes, or LOSTs. These
sales taxes are applied and collected
at the state or county level, and
charged in addition to the state tax
rate. For comparison purposes, I
used the weighted average local tax
rate published by the Tax Foundation,
a non-partisan non-profit
research institute set up to educate
taxpayers on tax policy.
Of the 50 states, five don’t impose
a state sales tax: Montana, Alaska,
Delaware, New Hampshire and
Oregon. Among those, only Alaska
and Montana allow local option
taxes. In Alaska, the weighted
average is 1.1 percent (although
Juneau’s city sales tax is 5 percent).
Montana’s resort tax is limited to
3 percent; only Whitefish collects
less, at 2 percent.
California has the highest state
rate, at 7.25 percent, down one
point from 8.25 percent on July 1,
2011. Tennessee tops the nation for
combined tax rates, with a 7 percent
state tax and 2.44 percent average
local tax. That is a combined rate
of 9.44 percent. Colorado has the
lowest sales tax rate, at 2.9 percent;
however, its average local rate is
4.08 percent, for a combined rate of
6.98 percent.
Most states allow exemptions on
the purchases of unprepared food
and medications. Those that do tax
food purchases often have rebate or
credit programs in place to compensate
low-income households.
Arkansas, Illinois, Missouri, Tennessee,
Utah, Virginia, and West
Virginia tax food at a lower rate.
In 2011, 17 states planned sales tax
holidays, during which times customers
are exempt from state sales
tax on certain items. These generally
last for three days, and change
from year to year.
Comparison of sales tax rates is
complicated because of the vast
number of local option taxes. At 3
percent, Big Sky’s overall tax rate is
lower than most sales taxes in the
nation. Resort tax is not collected
on food or other “necessities of
life,” and is invested directly into
the community, so Big Sky reaps
the benefits of the resort tax on a
daily basis.

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