Where Do Our Sales Taxes Go?

Updated on April 5, 2022 | by Joseph Williams

How Sales Taxes Work

We all pay the sales tax whenever we are purchasing clothing, groceries or some other product. We always wonder what they do with all the money, and where it goes. There are very few people who actually know where our sales taxes go and where they are used. There are times when the taxpayers’ who do the sales tax filing, they don’t know where does the sales tax go.

Some states in the United States help educate the nation’s children, build and repair the roads and bridges, provide health care to low-income families, etc. Many of the services as mentioned earlier are essential for building a strong, healthy community and the nation’s long-term economic vitality.

The sales tax which we pay becomes the sales revenue for the state government. According to the National Association of State Budget Officers, the 50 states and the District of Columbia of the United States (US) spend around $1.2 trillion in state revenue in the year 2016. 

By far, most of the state spending, on an average, has been on education (K-12 and higher education) and health care. These two services are required by low-income families and children who are usually not able to afford it. But the states also help fund a variety of other services as well. These services include the transportation services, pension & health care benefits for public employees, state police, parks, corrections, environmental projects, recreation, housing for the poor, and care for mental health patients, economic development and aid to the local governments.

Education has been a constant area where the state spending goes for over a decade now. Another field where the state revenue is spent the most is the Health care area as not many people are able to afford proper health care services. Though, share of state budgets has also been devoted to the corrections and transportations as well as the Medic aid.

The states spend around an average of their sales tax revenue for the entire country of the United States. But there is a specific mix of spending which varies from state to state. These variations of state spending depend on factors such as –

  • How the state and their localities share the funding responsibilities for the public services 
  • How much the state policymakers choose to invest in health care, education and some other areas as well.

For example, the state of South Dakota spends around 16.7% of the state revenue on K-12 education. While on the other hand, Vermont spends 48% for K-12 education. 

Another example, the state of Wyoming spends around 8% of its state budget on the Medical Aid while on the other hand, Missouri spends 27% of its budget on the Medicaid aid.

Though as mentioned before, the spending mix on the areas varies from state to state, and also sometimes city to city as well. The spending amount also depends on the state’s fund and the amount of sales tax which it has acquired. So those of you who didn’t know where their sales tax is going, this is where it is going. It is going for the benefit of your country and your state.

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