Sales tax is not the same everywhere, and it is set by state and local governments, not the federal government
Sales tax is a percentage added to the price of goods and some services at the point of sale. The rate you pay depends on where you live and where you buy the item. State governments set a base rate, and cities and counties can add their own local tax on top of that. This means the same item costs different amounts in different places.
No national sales tax exists in the United States. Instead, each state decides whether to have a sales tax and at what rate. Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no state sales tax at all. The remaining 45 states and Washington, D.C., all have one, ranging from 2.89% in Colorado to 7.25% in California, though most fall between 4% and 7%.
When you buy something, you see the base state rate plus any local additions. A city might add 1% to 2% on top of the state rate. Some counties add more. The total can range from under 3% in some places to over 10% in others.
Key Takeaways
- Sales tax rates vary by state and by city or county within that state, so the same purchase costs different amounts depending on location.
- Five states have no sales tax at all; the others range from roughly 3% to 7% at the state level, with local additions on top.
- Most states tax goods like clothing and groceries, though some exempt groceries or clothing under certain conditions.
- Services like haircuts, repairs, and professional fees are often not taxed, even in states with high sales tax on goods.
- The tax is calculated on the subtotal before it is shown to you, so the final price at checkout includes the tax amount.
How state and local rates combine
The sales tax you actually pay is the sum of the state rate and any local rates that apply to your location. If your state has a 5% rate and your city adds 2%, you pay 7% total. If you drive to a neighboring county with a different local rate, the tax changes.
Some states allow counties or cities to set their own rates within limits. Others set a single statewide rate with no local variation. A few states let certain cities opt into a higher rate to fund specific projects. This is why two stores in the same state can have different tax rates if they are in different cities or counties.
Online purchases complicate this further. Many states now require online retailers to charge sales tax based on the buyer's address, not the seller's location. This means an online order shipped to your home is taxed at your local rate, even if the company is based elsewhere.
What items are taxed and what are not
Most states tax clothing, electronics, furniture, and other goods. But many states exempt groceries, prescription medications, and medical equipment. Some states tax groceries at a lower rate than other goods. A few states exempt clothing under a certain price point or during a specific "tax-free" week.
Services are often not taxed. A haircut, car repair, plumbing work, or doctor visit typically has no sales tax, even in states with high tax rates on goods. However, some states do tax certain services — for example, some tax hotel rooms, restaurant meals, or personal services like massage therapy.
The rules vary widely by state. What is exempt in one state may be taxed in another. If you are unsure whether a specific item or service is taxed where you live, your state revenue department's website lists the rules for your state.
How sales tax is calculated at checkout
Sales tax is calculated on the subtotal of your purchase — the price before tax is added. If you buy an item for $20 and the tax rate is 8%, the tax is $1.60, and your total is $21.60. The tax is not calculated on the tax itself.
When you see a price tag in a store, it usually does not include sales tax. The tag shows the pre-tax price. The tax is added when you check out. Online retailers sometimes show the tax separately in the cart, and sometimes include it in the final total. Either way, the amount you pay includes the tax.
Some items in a single purchase may be taxed at different rates. If you buy groceries (often untaxed) and a magazine (often taxed) together, the store calculates tax only on the magazine. The register does this automatically.
Sales tax rates by state
| State | State Rate | Typical Local Addition | Groceries Taxed? |
|---|---|---|---|
| Alabama | 4% | Up to 7% | Yes |
| Alaska | 0% | Up to 7.5% | No state tax |
| Arizona | 5.6% | Up to 3.5% | Yes |
| California | 7.25% | Up to 2.25% | No |
| Colorado | 2.9% | Up to 8% | No |
| Connecticut | 6.35% | None | No |
| Delaware | 0% | None | No state tax |
| Florida | 6% | Up to 2% | Yes |
| Georgia | 4% | Up to 4% | Yes |
| Illinois | 6.25% | Up to 3% | No |
| New York | 4% | Up to 4.875% | No |
| Texas | 6.25% | Up to 2% | Yes |
| Washington | 6.5% | Up to 3.9% | Yes |
This table shows a sample of states. Rates change periodically, and local rates vary within each state. For your exact rate, search "[your city] sales tax rate" or visit your state revenue department's website.
Why sales tax rates differ between states
States set their own tax rates based on their budget needs and policy choices. Some states rely heavily on sales tax to fund schools, roads, and services. Others use income tax or other sources instead. States that have no income tax often have higher sales tax rates to make up the difference.
Local governments add their own tax to fund schools, police, fire departments, and public transit. A city with expensive infrastructure or high service costs may have a higher local rate than a rural county. This is why neighboring cities can have noticeably different total rates.
Some states also use sales tax to encourage or discourage certain purchases. Exempting groceries and medicine keeps the tax burden lower on necessities. Taxing restaurant meals or hotel rooms targets visitors and discretionary spending.
Frequently Asked Questions
Do I pay sales tax on online purchases?
Most states now require online retailers to charge sales tax based on where you live, not where the company is based. This applies to purchases from large retailers and many smaller ones. Some very small sellers may not collect it, but you may owe it when you file taxes. Check your state's rules for specifics.
Is sales tax the same everywhere in my state?
No. The state rate is the same, but cities and counties add their own local tax on top. Two stores in the same state can have different total rates if they are in different cities. Use an online sales tax calculator or call your city or county tax office to find your exact rate.
Why is there no sales tax in some states?
Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have chosen not to have a state sales tax. They fund government services through other taxes, like income tax or business taxes. Some of these states allow cities to set their own local sales tax, and some do not.
Are used items taxed?
Used items sold by businesses are usually taxed at the same rate as new items. Used items sold between individuals are typically not taxed. If you sell a used car to a private buyer, no sales tax applies. If you sell it to a dealer or buy from one, tax usually applies.
Do I have to pay sales tax if I buy something out of state?
If you buy in person in another state, you pay that state's tax. If you buy online from an out-of-state retailer and have it shipped to your home, you pay your home state's tax. If you buy something in person and bring it home, you generally do not owe tax in your home state, though a few states have tried to change this.