The tax hike across the U.S. represents the largest annual expansion in the number of cities who either increased their existing rate or initiated a sales tax in the past four years, accordingto the annual sales tax rate study released today by Vertex Inc.

North Courtland, Ala., had the largest increase nationwide, rising from a 1.0 percent sales tax rate to 4.0 percent. Seldovia, Alaska, experienced the second largest increase from 2.0 percent to 4.5 percent, followed by Fredonia, Ariz., and Watts, Okla., with increases from 2.0 percent to 4.0 percent.

Several large U.S. cities also raised their sales tax rates between 0.1 and 0.2 percent in 2007, including Boulder, Colo.; Phoenix, Ariz.; St. Louis, Mo., and areas of Denver, Colo. and Seattle, Wash. States with the most number of city rate increases included Colorado, Missouri, Texas and Washington.

Also in 2007, Catawba Indian Reservation, South Carolina, joined Wrangell, Alaska, in having the highest city sales tax rate of 7.0 percent. South Carolina was the only state to raise its state-wide sales tax rate, from 5.0 percent to 6.0 percent.

"It is evident from the more than 450 cities raising sales tax rates last year that local governments see tax revenue as a viable part of the solution in addressing revenue shortfalls. It is especially critical that corporate taxpayers stay abreast of these sales tax rate adjustments and keep close records of all their transactions in order to remain in compliance and be prepared for potential state audits," said John Minassian, Vertex vice president of tax content development.

The report revealed that 2007 sales tax rates remained higher than any previous year among those cities increasing an existing rate, illustrating an overall steady growth in the combined state, county and city average rate since Vertex began tracking the data in 1981. However, the average U.S. sales tax rate among all taxing cities decreased slightly in 2007 to 8.573 percent, as compared to 8.579 percent in 2006, due to the number of cities initiating lower rates on first-time taxes.

The Vertex Sales Tax Rate Report (PDF) is compiled annually by Vertex Research and provides a detailed summary of sales tax rate changes at the state, county, city, and district levels nationwide.