Question

What advantage does a state have in charging a relatively high state sales tax? In contrast, what advantage does a state have in charging relatively low (or no) sales tax? If one state has a high sales tax and the state next door has a low sales tax, would that affect your answer to the first two questions?

Answer 1

Advantages that state have in charging a relatively high state sales tax:

When a state decided to charge a relatively high state sales tax it would have considered various scenarios and the following advantage would be available to the state:
a) Higher revenue flow if the consumer demand for the product is high.
b) State can also charge high state sales tax to discourage harmful consumption of products like tobacco and alcohol thus keeping the public health in check.

Advantages that state have in charging low or no state sales tax:

The following advantage would be available to the state if there is low or no state sales tax:
a) To promote exports or consumption of a product (Say electric vehicles which are environmental friendly) the state may lower tax or no state sales tax would be charged.
b) To improve the economy situation and money flow, the state might reduce the taxes so that there is an increase in public consumption and increase flow of money in the economy.

If one state has a high sales tax and the state next door has a low sales tax:
The advantages in levying a high sales tax may not be there if the neighbouring state has a low sales tax as consumers would be vary of paying a high tax for the same product which is available at lower price in the other state. If there are significant cost savings in purchasing from the neighbouring state, then consumers would generally buy from low state sales tax than a higher state sales tax.

The lower sales state tax would see its revenue increased as compared to the higher sales state tax given the above scenarios. If there is ease of movement of goods between the state it would be more easier and convenient for consumer to alter their preferences between the states.