Do sales taxes determine where you shop?

Tuba City, Ariz., home of the nation's highest sales taxes.

When I was in junior high — way back in the days when I could get only three network stations through my rabbit-ear antennae and a-twitter was the way I felt when the little girl down the street said hi — I visited Tuba City, Ariz.

Our school had an enterprising and energetic band teacher, and he somehow got our school band a gig there. I remember an agonizingly long bus ride (my school was in Phoenix), followed by a lackluster performance in front of several friendly but bored-looking students.

---

Tuba City is on the Navajo reservation in northern Arizona. It isn’t really on the way to anything. Find the Grand Canyon, then drive east for about 50 miles. It’s actually the largest city in the Navajo Nation, but it is home to fewer than 10,000 people.

I mention this because a new report by the Tax Foundation in Washington identifies Tuba City as having the highest sales tax rate in the United States, when you combine both state and local taxes.

If you pick up a pack of gum on your way through town, be prepared to pay an extra 13.725 percent. That includes a 6 percent tribal tax.

My guess, however, is that Tuba City retailers don’t lose a lot of business because of high taxes. Sure, that kind of rate may keep a corporation from moving its headquarters there. But really, Tuba City is the sort of place you have to go out of your way to see, and I doubt many people would move there, or drive there to shop, if the sales tax was zero.

That’s not so in other places, where sales taxes are used as selling points. And yet the interior West, Tuba City notwithstanding, has generally low sales tax rates despite long distances between cities.

The report ranks states both by their statewide sales tax rates and their combined state and local rates, adjusted for population. That is, a small place like Tuba City has a relatively small impact on Arizona’s total score.

Arizona, however, still has the second highest overall rate in the nation.

Authors of the report (read it by clicking here) make a point of how businesses, states and even cities use their relative sales tax rates as lures for shoppers. This is especially true in areas were populated areas straddle borders.

At the border to Delaware, for instance, the state uses its welcome sign to tell motorists it is “home of the tax-free shopping.” Oregon has no sales taxes. Some people choose to live in Vancouver, Wash., just across the border from Portland, Ore., so they can live in a state with no income tax and do their tax-free shopping in Oregon.

Local tax rates also lure shoppers from high-tax inner cities to low-tax suburbs.

The report says “state and local governments should be cautious about raising rates too high relative to their neighbors because doing so will amount to less revenue than expected, or in extreme cases, revenue losses despite the higher tax rate.”

My guess, however, is that this is less true in the interior West.

Utah has the 28th highest overall state and local sales tax rate. As I’ve mentioned, its southern neighbor, Arizona, ranks second, but Wyoming, just to the north, ranks 42nd.

I have heard talk of Utahns driving to Wyoming to buy high-powered fireworks that are illegal at home, or to Idaho to buy lottery tickets. But those are novelty items. Salt Lake City is about 90 minutes from Evanston, Wyo. I’ve never heard of anyone going up there to buy furniture or clothing or electronics. The savings would be minimal after the cost of gas is included.

A low tax rate still is one of the selling points for luring companies to your area, combined with a host of other factors. Arizona’s weather probably outweighs its sales tax rate when businesses make  those decisions, just as Wyoming’s weather may offset its low rate.

It is interesting, however, that sales tax rates in the interior West remain generally lower than average (with the exception of Arizona and Nevada), despite their distance from neighboring states.

Now, if those unfortunate folks in Tuba City only had a nearby place to shop that wasn’t on tribal land.