Sales tax calculator

How US sales tax works

Sales tax in the United States is a consumption tax levied by state and local governments on the sale of goods and some services. Unlike VAT (value-added tax) used in many other countries, US sales tax is only collected at the point of final sale to the consumer — businesses generally do not pay sales tax on items they resell.

Each state sets its own base sales tax rate, and many allow cities, counties and special districts to add local surcharges on top of that. This means the total sales tax rate you pay depends on both your state and your specific location within that state. For example, New York's state rate is 4% but combined rates in New York City can reach 8.875% once local and transit taxes are added.

The seller is responsible for collecting the correct tax at checkout and remitting it to the appropriate taxing authorities. Online retailers are also required to collect sales tax following the 2018 South Dakota v. Wayfair Supreme Court ruling, which allowed states to require out-of-state sellers to collect and remit tax on sales to their residents.

State-by-state variations

Sales tax rates vary significantly across the United States. Five states — Alaska, Delaware, Montana, New Hampshire and Oregon — have no statewide sales tax (though Alaska allows local option taxes). At the higher end, Tennessee, Louisiana, Arkansas and Washington have some of the highest combined state and average local rates, often exceeding 9% in certain areas.

Some states apply sales tax to a broad range of goods and services, while others offer extensive exemptions. For instance, most states exempt groceries and prescription drugs, but a few — like Alabama and Mississippi — do tax groceries, usually at a reduced rate. Clothing is tax-exempt in some states (including New York, Massachusetts and Minnesota) but taxable in others. Understanding your local tax rules helps you budget more accurately for major purchases.

What's taxable vs exempt

• Tangible personal property — most physical goods like electronics, furniture, clothing, appliances and vehicles are taxable unless specifically exempted.
• Groceries — unprepared food is exempt in most states, though some tax it at a reduced rate or fully.
• Prescription drugs and medical devices — exempt in all states with a sales tax.
• Services — most services (haircuts, legal fees, cleaning) are not taxed in many states, but some states tax specific services. This varies widely.
• Digital goods — streaming services, e-books and software downloads are increasingly being taxed as states expand their tax base to cover digital products.
• Business inputs — raw materials, machinery and items purchased for resale are typically exempt when the buyer provides a resale certificate.

Frequently asked questions

What is sales tax?

Sales tax is a consumption tax charged by state and local governments on the sale of goods and certain services. It is calculated as a percentage of the purchase price and collected at the point of sale.

How do state sales tax rates vary?

State rates range from 0% in Delaware, Montana, New Hampshire and Oregon to over 9% combined in states like Tennessee and Louisiana. Local jurisdictions can add additional surcharges, so the exact rate depends on your zip code.

What items are sales tax exempt?

Common exemptions include groceries, prescription medications, medical devices, and clothing in some states. Exemptions vary by state — check your local department of revenue for a full list.

Do I pay sales tax on online purchases?

Yes. Since the 2018 Wayfair ruling, online retailers must collect sales tax on shipments to most states, just like brick-and-mortar stores. The rate is based on the buyer's shipping address.

What's the difference between sales tax and VAT?

Sales tax is collected only at the final sale to the consumer. VAT (value-added tax) is collected at every stage of production and distribution. The US uses sales tax; most other countries use VAT.