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What is Sales Tax?

A sales tax is a tax type imposed by state and local governments on most goods and services. Consumers typically pay this tax at the point of sale, which is calculated by multiplying the sales tax rate by the price of the good or service purchased.

Certainly, sales tax is not exclusive to the United States. In other countries, a similar tax on goods and services exists, known as value-added tax (VAT).

For example, let's say you bought a pair of shoes for $100 in California, where the sales tax is just over 7%. In this case, you would owe about $7 in sales tax, bringing your total purchase to about $107 ($100 + $7). If the city where you bought the shoes also has a local sales tax, you'd have to pay that in addition to the state sales tax.

Sales Tax Calculator

The amount of sales tax you pay depends on the state in which you make your purchase. In addition, certain cities and counties may charge a local sales tax in addition to the state tax.

Use our free sales tax calculator to estimate your sales tax.

State Sales Tax

The amount of state sales tax you'll pay on a purchase depends on where you purchased the item. Each state has its own sales tax rate, and many cities and counties charge additional sales taxes. Here's a breakdown of the sales tax rates you can expect to pay in each state.

State	State Tax Rate	Avg. Local Tax Rate
Alabama	4%	5.24%
Alaska	0%	1.81%
Arizona	5.60%	2.77%
Arkansas	6.50%	2.94%
California	7.25%	1.60%
Colorado	2.90%	4.89%
Connecticut	6.35%	0%
Delaware	0%	0%
Florida	6%	1.02%
Georgia	4%	3.39%
Hawaii	4%	0.44%
Idaho	6%	0.02%
Illinois	6.25%	2.59%
Indiana	7%	0%
Iowa	6%	0.93%
Kansas	6.50%	2.25%
Kentucky	6%	0%
Louisiana	4.45%	5.10%
Maine	5.50%	0%
Maryland	6%	0%
Massachusetts	6.25%	0%
Michigan	6%	0%
Minnesota	6.88%	0.65%
Mississippi	7%	0.06%
Missouri	4.23%	4.14%
Montana	0%	0%
Nebraska	5.50%	1.47%
Nevada	6.85%	1.39%
New Hampshire	0%	0%
New Jersey	6.63%	-0.02%
New Mexico	4.88%	2.73%
New York	4%	4.53%
North Carolina	4.75%	2.25%
North Dakota	5%	2.04%
Ohio	5.75%	1.49%
Oklahoma	4.50%	4.49%
Oregon	0%	0%
Pennsylvania	6%	0.34%
Rhode Island	7%	0%
South Carolina	6%	1.50%
South Dakota	4.20%	1.91%
Tennessee	7%	2.55%
Texas	6.25%	1.95%
Utah	6.10%	1.10%
Vermont	6%	0.36%
Virginia	5.30%	0.47%
Washington	6.50%	2.90%
West Virginia	6%	0.57%
Wisconsin	5%	0.43%
Wyoming	4%	1.44%
D.C.	6%	0%

Source: Tax Foundation.

Frequently Asked Questions

Which items are subject to sales tax?

Sales tax applies to most tangible goods, such as clothing or books, with one notable exception: food purchased for home consumption. Only 13 states collect sales tax on groceries.

States without Sales Tax

At present, five states do not impose a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Keep in mind you always can start your US company in Delaware with Startxpress anywhere and anytime you want!

Is it possible to deduct Sales Tax?

Yes, but it can be complicated. On federal tax returns, individuals who itemize can claim the state and local tax (SALT) deduction. This allows them to deduct up to $10,000 of either state and local sales taxes paid or state and local income taxes paid during the tax year.

This deduction can be beneficial for individuals who live in states with high sales tax rates and have made significant taxable purchases of goods and services.

However, it's important to note that in order to claim the SALT deduction, you must itemize your deductions, which may not be beneficial for everyone. Consulting with a trusted tax professional, such as a Startxpress, or using quality tax software can provide clarity on your specific tax situation.

Who collects sales tax?

The seller is responsible for collecting and remitting sales tax to the appropriate state and local tax authorities, if applicable.

Does my business have to collect sales tax?

If you sell tangible goods that aren't exempt from sales tax, such as groceries, you're probably required to collect sales tax. However, if you're providing a service, such as house cleaning or legal work, whether you're required to collect sales tax depends on your state's specific laws. In addition, if you sell goods online, you're usually required to collect sales tax from customers located in the same state as your business.

What happens if I don't collect sales tax?

Failure to collect the required sales tax can result in significant fines and interest, which vary by state. In some cases, you may also face criminal charges or risk losing your vendor license.

FREE SALES TAX CALCULATOR