Sales tax is a percentage added to the price of goods or services at the point of sale

When you buy something in a store or online, the final price you pay often includes sales tax — a percentage that goes to your state or local government. The tax is calculated on the item's price and added to your receipt. The rate varies by location: some states have no sales tax at all, while others charge between 4 and 10 percent. Within a single state, cities and counties may add their own local tax on top of the state rate, which is why the same item costs different amounts in different places.

Sales tax applies to most goods — clothing, groceries, electronics, furniture — but not all. Some states exempt groceries or prescription medications. Services like haircuts, car repairs, or plumbing sometimes are taxed and sometimes are not, depending on your state's rules. The merchant collects the tax from you and sends it to the government, so you do not pay it separately.

Key Takeaways

  • Sales tax is a percentage added to the purchase price and varies by state and sometimes by city or county within that state.
  • To calculate sales tax, multiply the item price by the tax rate as a decimal — for example, a $100 item in a place with 7 percent tax costs $107.
  • Groceries, prescription drugs, and some services are often exempt from sales tax, but the rules differ by state.
  • Online purchases are subject to sales tax in most states, though the rules have changed in recent years and vary by seller size.

How to calculate sales tax on a single purchase

The math is straightforward. Take the price of the item, convert the tax rate to a decimal, and multiply. If an item costs $50 and the sales tax rate is 8 percent, you convert 8 percent to 0.08, then multiply: $50 × 0.08 = $4. You add that to the original price: $50 + $4 = $54 total.

Most receipts show this calculation for you — the subtotal, the tax amount, and the total. If you are checking your receipt or planning a budget, you can work backward too. If the total was $54 and you know the tax rate is 8 percent, you can divide the total by 1.08 to find the pre-tax price. The reason you use 1.08 instead of 0.08 is that the total includes both the original price and the tax added to it.

Sales tax rates by state and locality

State sales tax rates range from zero (in states like Delaware, Montana, New Hampshire, and Oregon) to as high as 7.25 percent in California. Most states fall between 4 and 6 percent. However, the rate you actually pay depends on where the sale happens. If you buy something in a city or county that has added its own local sales tax, that gets added on top of the state rate.

For example, Colorado's state sales tax is 2.9 percent, but Denver adds 3.62 percent on top of that, bringing the total to 6.52 percent. A $100 purchase in Denver costs $106.52, while the same purchase in a different Colorado county might cost $102.90 or $105.00 depending on local rates. If you move or shop in a different location, the rate changes. You can find your local rate by searching "[your city] sales tax rate" or by checking your state's revenue or taxation department website.

What items are usually exempt from sales tax

Most states do not charge sales tax on groceries — items like bread, milk, vegetables, and meat. The logic is that food is a necessity. However, some states tax prepared foods, candy, or soft drinks differently than raw groceries. A sandwich from a deli counter might be taxed while a loaf of bread is not.

Prescription medications are exempt in all states. Over-the-counter medicines like pain relievers or cold medicine are sometimes taxed and sometimes not, depending on your state. Clothing is taxed in most states, though a few states exempt it entirely. Services — haircuts, repairs, consulting — are taxed in some states and not others. The rules are specific to each state, so if you need to know whether a particular item or service is taxed where you live, check your state's tax department website or ask the merchant.

How sales tax works for online purchases

Online retailers are now required to charge sales tax in most states, even if the seller is located elsewhere. This rule changed in 2018 when the U.S. Supreme Court ruled that states could require online sales tax collection. The requirement applies to large sellers — generally those with more than $100,000 in annual sales or 200 transactions in a state — though the exact threshold varies by state.

When you buy online, the tax rate applied is based on the delivery address, not where the seller is located. If you order something to be shipped to an address in a state with 6 percent sales tax, you pay 6 percent, even if the seller is in a state with no sales tax. Small sellers and some marketplaces may not yet collect sales tax, which means you might owe it yourself when you file taxes, though this is rare for individual purchases. If you are unsure whether tax was charged, check your order confirmation or receipt.

Sales tax on specific situations

If you buy something and return it, the sales tax is refunded along with the purchase price. You do not pay tax on the refunded amount. If you exchange an item for a different one of equal value, you typically do not pay additional tax. If you exchange for something more expensive, you pay tax only on the price difference.

If you buy an item in one state and take it to another state, you do not pay sales tax again. Sales tax is charged at the point of purchase, not based on where you use the item. If you are a business buying items for resale, you can usually avoid paying sales tax by providing a resale certificate to the seller, though the rules and forms vary by state.

Frequently Asked Questions

Is sales tax included in the price shown on the shelf?

No. The shelf price is the pre-tax price. Sales tax is added at checkout. This is why the amount you pay is higher than the labeled price. Some countries include tax in the displayed price, but the United States does not.

Do I have to pay sales tax if I buy something online from out of state?

Yes, in most cases. Large online retailers must charge sales tax based on your delivery address. If a small seller does not charge tax, you may owe it when you file your taxes, though this is uncommon for individual purchases and rarely enforced.

Can I get sales tax back if I move to a state with no sales tax?

No. Sales tax is final at the point of purchase. Moving does not may have access to you to a refund on past purchases. However, future purchases in your new state will be subject to that state's tax rate, which may be lower or zero.

Why do some items not have sales tax?

States exempt certain items — usually groceries and medicines — because they are considered necessities. The rules vary by state and sometimes by how the item is sold or used. Check your state's tax rules for specifics on what is and is not taxed.

How do I know the sales tax rate for my area?

Search "[your city] sales tax rate" or visit your state's revenue or taxation department website. You can also ask a cashier or check a recent receipt. The rate includes both state and local taxes combined.