Sales Tax: Complete Guide, Rates, Sales Tax Calculator & Examples

Sales tax is one of the most common forms of taxation in the United States, affecting almost every consumer purchase. Whether you are a shopper, business owner, freelancer, or online seller, understanding how U.S. sales tax works is essential for accurate pricing, compliance, and financial planning.
This detailed guide explains what sales tax is, how it works in the USA, how to calculate it, current rates, sales tax vs VAT, and much more.

What Is Sales Tax?

Sales tax is a consumption tax imposed by state and local governments on the sale of goods and certain services. It is typically added to the purchase price at the point of sale and paid by the consumer, while the seller collects and remits it to the government.
In the United States:
There is no federal sales tax
Sales tax is governed by states, counties, and cities
Rates vary widely depending on location

How Sales Tax Works in the USA

Unlike many countries that use a national Value-Added Tax (VAT), the U.S. uses a retail-level sales tax system.
Key Characteristics:
Applied only at the final sale to the consumer
Businesses do not pay sales tax on inventory purchases (resale exemption)
Collected by retailers, not directly by consumers
Who Pays Sales Tax?
Consumers pay sales tax
Businesses act as tax collectors
Sellers must remit collected tax to the appropriate tax authority

U.S. Sales Tax Structure

Sales tax in the U.S. can include three layers:
State Sales Tax
County Sales Tax
City / Local Sales Tax
The final sales tax rate is the combined total of all applicable taxes.
Example:
If a location has:
State tax: 6%
County tax: 1%
City tax: 1.5%
Total sales tax rate = 8.5%

sales tax rates for different U.S. states

State	General State Sales Tax	Max Tax Rate (State + Local)
Alabama	4%	13.50%
Alaska	0%	7%
Arizona	5.60%	10.725%
Arkansas	6.50%	11.625%
California	7.25%	10.50%
Colorado	2.90%	10%
Connecticut	6.35%	6.35%
Delaware	0%	0%
District of Columbia	6%	6%
Florida	6%	7.50%
Georgia	4%	8%
Guam	4%	4%
Hawaii	4.166%	4.712%
Idaho	6%	8.50%
Illinois	6.25%	10.25%
Indiana	7%	7%
Iowa	6%	7%
Kansas	6.50%	11.60%
Kentucky	6%	6%
Louisiana	4.45%	11.45%
Maine	5.50%	5.50%
Maryland	6%	6%
Massachusetts	6.25%	6.25%
Michigan	6%	6%
Minnesota	6.875%	7.875%
Mississippi	7%	7.25%
Missouri	4.225%	10.85%
Montana	0%	0%
Nebraska	5.50%	7.50%
Nevada	6.85%	8.375%
New Hampshire	0%	0%
New Jersey	6.625%	12.625%
New Mexico	5.125%	8.688%
New York	4%	8.875%
North Carolina	4.75%	7.50%
North Dakota	5%	8%
Ohio	5.75%	8%
Oklahoma	4.50%	11%
Oregon	0%	0%
Pennsylvania	6%	8%
Puerto Rico	10.50%	11.50%
Rhode Island	7%	7%
South Carolina	6%	9%
South Dakota	4%	6%
Tennessee	7%	9.75%
Texas	6.25%	8.25%
Utah	6.1%	8.35%
Vermont	6%	7%
Virginia	5.30%	7%
Washington	6.50%	10.60%
West Virginia	6%	7%
Wisconsin	5%	7.9%
Wyoming	4%	6%

States With No Sales Tax

As of 2025, five U.S. states do not impose statewide sales tax:
Alaska (local taxes may apply)
Delaware
Montana
New Hampshire
Oregon.
These states are often considered more consumer-friendly but may generate revenue through other taxes.

What Items Are Taxable?

Commonly Taxed Items
Clothing (in most states)
Electronics
Furniture
Restaurant meals
Digital products (in some states).
Commonly Exempt Items
Groceries (many states)
Prescription drugs
Medical equipment
Certain educational materials
Each state defines taxable goods differently.

How to Calculate Sales Tax?

Sales tax calculation is simple and follows this formula:
Sales Tax Formula

Sales Tax Amount = Price × (Tax Rate ÷ 100) Final Price = Price + Sales Tax
Example Calculation
Price: $100
Sales tax rate: 6.5%

Sales Tax = 100 × 0.065 = $6.50 Final Price = $106.50
👉 Use our Sales Tax Calculator to instantly compute the tax without manual math.

Reverse Sales Tax Calculation

Sometimes you know the final price and tax rate but want the original price.
Formula:

Before Tax Price = Final Price ÷ (1 + Tax Rate ÷ 100)
Example:
Final price: $106.50
Tax rate: 6.5%

Before Tax = 106.50 ÷ 1.065 = $100

Sales Tax for Online & E-Commerce Sellers

Nexus Rules
Businesses must collect sales tax if they have sales tax nexus, which may include:
Physical presence
Economic nexus (sales threshold)
Employees or warehouses
Since the Wayfair Supreme Court ruling, online sellers may be required to collect sales tax even without a physical presence.

Sales Tax for Services

ot all services are taxable, but some states tax:
Repair services
Digital services
Professional services (limited states)
Always check state-specific regulations.

Frequently Asked Questions (FAQs)

Is sales tax refundable?
Generally no, unless the item is returned.
Do tourists pay sales tax?
Yes, sales tax applies regardless of residency.
Is sales tax included in price?
In the U.S., prices are usually shown before tax.

Conclusion

Sales tax in the United States is a location-based consumption tax that varies by state and locality. Understanding how it works is crucial for consumers and businesses alike. Because rates differ widely, using a reliable Sales Tax Calculator ensures accuracy and compliance.
Whether you’re shopping, running a store, or managing online sales, knowing how to calculate sales tax helps you avoid surprises and financial errors.