Sales Tax: What It Is, Rates and How to Calculate
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What is sales tax?
A sales tax is a tax charged by state and local governments on most goods and services. Consumers typically pay the tax at the point of sale, and it is calculated by multiplying the sales tax rate by the price of the good or service being purchased.
Sales tax example: If you bought a pair of shoes for $100 in California, where the sales tax is just over 7%, you’d owe around $7 in sales tax, making your total purchase around $107 ($100 x 0.07 =$7). If the city where you bought the shoes also charged a local sales tax, you would need to pay that additional fee as well.
Sales tax calculator
The amount of sales tax you pay depends on the state where you made your purchase. Some cities and counties can also charge a local sales tax on top of the state-level one, which this calculator does not account for.
States with no sales tax
Only five states — Alaska, Delaware, Montana, New Hampshire and Oregon — do not charge sales tax. (Some parts of Alaska do levy a local sales tax, though.)
Sales tax rates by state
There is no federal sales tax. Sales tax rates are determined on a state-by-state basis. Keep in mind that a state's sales tax may not reflect the whole picture: cities and counties can charge local sales taxes, too.
Here's how much sales tax you can expect to pay in each state, per the Tax Foundation.
State | State Tax Rate | Avg. Local Tax Rate |
|---|---|---|
Alabama | 4% | 5.289% |
Alaska | 0% | 1.821% |
Arizona | 5.6% | 2.779% |
Arkansas | 6.5% | 2.948% |
California | 7.25% | 1.601% |
Colorado | 2.9% | 4.907% |
Connecticut | 6.35% | 0% |
Delaware | 0% | 0% |
Florida | 6% | 1.002% |
Georgia | 4% | 3.384% |
Hawaii | 4% | 0.500% |
Idaho | 6% | 0.026% |
Illinois | 6.25% | 2.605% |
Indiana | 7% | 0% |
Iowa | 6% | 0.941% |
Kansas | 6.5% | 2.154% |
Kentucky | 6% | 0% |
Louisiana | 4.45% | 5.113% |
Maine | 5.5% | 0% |
Maryland | 6% | 0% |
Massachusetts | 6.25% | 0% |
Michigan | 6% | 0% |
Minnesota | 6.875% | 1.163% |
Mississippi | 7% | 0.062% |
Missouri | 4.225% | 4.160% |
Montana | 0% | 0% |
Nebraska | 5.5% | 1.468% |
Nevada | 6.85% | 1.386% |
New Hampshire | 0% | 0% |
New Jersey | 6.625% | -0.024% |
New Mexico | 4.875% | 2.742% |
New York | 4% | 4.532% |
North Carolina | 4.75% | 2.246% |
North Dakota | 5% | 2.041% |
Ohio | 5.75% | 1.488% |
Oklahoma | 4.5% | 4.489% |
Oregon | 0% | 0% |
Pennsylvania | 6% | 0.341% |
Rhode Island | 7% | 0% |
South Carolina | 6% | 1.499% |
South Dakota | 4.2% | 1.911% |
Tennessee | 7% | 2.548% |
Texas | 6.25% | 1.950% |
Utah | 6.1% | 1.149% |
Vermont | 6% | 0.359% |
Virginia | 5.3% | 0.471% |
Washington | 6.5% | 2.878% |
West Virginia | 6% | 0.567% |
Wisconsin | 5% | 0.696% |
Wyoming | 4% | 1.441% |
District of Columbia | 6% | 0% |
Source: Tax Foundation.
What items need to have sales tax?
Most tangible goods (such as clothing or books) carry a sales tax, except for one very important category: food purchased for use at home. Only 12 states charge sales tax on groceries.
Sales tax exemptions
Some states have no sales tax (or charge lower sales tax rates) on certain items necessary for everyday use, such as medications and clothing.
Throughout the U.S., there are also specific weekends or days when sales tax is suspended on certain items, such as electronics, school supplies, appliances, and other types of tools.
Can you deduct sales tax?
Yes, but it can be complicated. On federal tax returns, people who itemize can take the SALT deduction, which allows them to write off up to $10,000 worth of either state and local sales tax paid throughout the year or state and local income taxes.
This could be something to consider if you live in a state where sales tax is relatively high and you happen to have made a lot of taxable purchases of goods and services.
But keep in mind you have to itemize your deductions to take the SALT deduction, and itemizing doesn’t make sense for everyone. A trusted tax pro, such as a CPA, or quality tax software can help you get clarity on your particular situation.
» Ready to file? See our top picks for tax software
Who collects sales tax?
The seller collects the sales tax and then remits it to the state and local tax authorities, if applicable.
Is my business required to collect sales tax?
If you’re selling tangible goods that are not exempt from sales tax (such as groceries), you more than likely have to collect sales tax. If you’re selling a service, such as house cleaning or legal work, that will depend on your state’s specific laws.
If you’re selling goods online, you are typically required to collect sales tax from wherever your business is located.
What happens if you don’t collect sales tax?
If you were supposed to collect sales tax and didn’t, you could be looking at high financial penalties and interest. Those rates will depend on your state. You could also potentially face criminal charges or lose your vendor license.
