Tourists have long been entertained by the state's thriving music scene. High sales taxes will likely leave them singing the blues. Tennessee has the highest combined state and local sales tax rate, at 9.45 percent, according to the Tax Foundation. It doesn't tax income apart from a 6 percent levy on interest and dividends, and capital gains are exempt. Tennessee has an inheritance tax now (see the note below), but it will be phased out in 2016.
*On interest and dividend income; none on wages
**Plus a 2.75 % tax on certain sales worth $1,600.01 and up to $3,200
***Tennessee calls this an "inheritance tax," but it functions as an estate tax. The exemption is $2 million.