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TAX POLICY CENTER BRIEFING BOOK The State of State (and Local) Tax Policy How do state and local sales taxes work? SPECIFIC STATE AND LOCAL TAXES XXXX Q. How do state and local sales taxes work? A. Forty-five states and the District of Columbia levy general sales taxes that apply (with some exemptions) to all goods and certain services. Thirty-seven states (including, Alaska, which has no state tax) also allow general sales taxes at the local level. Most states apply separate sales taxes to particular goods, including tobacco, alcohol, and motor fuels. HOW MUCH REVENUE DO STATE AND LOCAL GOVERNMENTS RAISE FROM SALES TAXES? States rely on sales taxes more than local governments do. States collected $457 billion from sales taxes in 2017, or 35 percent of their own-source general revenue (table 1). “Own-source” revenue excludes intergovernmental transfers. Nearly two-thirds ($300 billion) of that total came from general sales taxes, while the other third ($157 billion) came from selective...