About 160 countries around the world, including all the other high-income countries of the world, use a value-added tax. The US has no value added tax, but 45 states and several thousand cities, use a sales tax as an alternative method of taxing consumption.  John L. Mikesell and Sharon N. Kioko provide a useful overview of the issues in “The Retail Sales Tax in a New Economy,” written for the 7th Annual Municipal Finance Conference, which was held on July 16-17, 2018, at the Brookings Institution.  Video of the conference presentation of the paper, with comments and discussion, is available here.

Here’s a short summary of the emergence and erosion of the retail sales tax (footnotes omitted):

“The American retail sales tax emerged from a desperation experiment in Mississippi in the midst of the Great Depression. Revenue from the property tax, the largest single source of state tax revenue at the time, collapsed, falling by 11.4 percent from 1927 to 1932 and by another 16.8 percent from 1932 to 1934. State revenue could not cover their service obligations or provide expected assistance to local governments. Mississippi (followed by West Virginia) showed that retail sales taxes could produce immediate cash collections, even in low-income jurisdictions. Other states paid attention. In 1933, eleven other states adopted the tax (two let the tax expire almost immediately). By 1938, twenty-two states (plus Hawaii, not yet a state) were collecting the tax; six others had also imposed the tax for a short time but had let them expire. …

“The national total retail sales tax collections exceeded the collections from every other state tax from 1947 through 2001. It was also the largest tax producer in 2003 and 2004 also (years in which individual income tax revenue was still impacted by the 2001 recession), but it was surpassed by state individual income tax revenues in other years since 2001. ,,, By fiscal 2016, total state individual income tax collections exceeded $345 billion, compared to over $288 billion for state retail sales taxes. However, those national totals conceal the continuing dominance of the retail sales taxes in a number of states …

A major and ongoing US sales taxes is that, from the start, they mostly did not cover services. Thus, as the US has shifted to a service-based economy, the amount of consumer spending doing to goods covered by the sales tax has diminished. As the base of the sales tax diminished, then states have gradually raised the rate of the sale tax so that it would bring in a similar proportion of overall state revenue. This dynamic of higher sales tax rates imposed on a shrinking base is not sensible.
looking only at the 45 states with sales taxes.

“[Here is] the history of mean retail sales tax breadth (implicit tax base / state personal income) across the states from 1970 to 2016. The record is one of almost constant decline, from 49.0 percent in 1970 to 37.3 percent in 2016. … The typical state retail sales tax base has narrowed as a share of the economy of the state over the years and this has meant that, in order for states to maintain the place of their sales tax in their revenue systems, they have been required to gradually increase the statutory tax rate they apply to that base. … [L]ittle good can be said about a narrow base / high statutory rate revenue policy. …