Sales tax is a percentage added to the price of goods and services at the point of purchase
When you buy something in a store or online, the final price you pay often includes sales tax — a tax collected by the seller and sent to the state or local government. The tax rate varies by location. Some states have no sales tax at all. Others charge between 4 and 10 percent, and local counties or cities may add their own percentage on top of the state rate. The total rate you see on your receipt depends on where you live and what you're buying.
Sales tax is different from income tax or property tax. It's collected only when a transaction happens, not based on what you earn or own. The seller acts as the collector — they add the tax to your bill, you pay it, and they send it to the government. You don't file paperwork or calculate it yourself as a consumer; the register does that automatically.
Key Takeaways
- Sales tax rates range from zero in some states to over 10 percent when state and local taxes combine, depending on your location.
- Not all items are taxed the same way — groceries, prescription medications, and some clothing are often exempt or taxed at lower rates.
- Online purchases are now subject to sales tax in most states, even when shipped from out of state.
- The seller collects and remits the tax to the government; you pay it as part of your purchase price but don't file it yourself.
Which states have no sales tax
Five states currently have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, this does not mean purchases in those states are tax-free. Alaska allows municipalities to charge local sales tax, so some cities and towns do collect it. The other four states have no sales tax at any level.
If you live in one of these states, you still pay sales tax on some purchases — typically on services like haircuts, repairs, or restaurant meals, depending on state law. And if you order something online from a retailer in another state, that retailer may still charge you sales tax based on where you live, not where they are located.
What items are usually exempt from sales tax
Most states exempt certain categories of goods from sales tax or tax them at a lower rate. The most common exemptions are groceries (unprepared food), prescription medications, and medical devices. Some states also exempt clothing, especially children's clothing. A few states exempt diapers, feminine hygiene products, or over-the-counter medications.
The rules vary significantly by state. What's tax-free in one state may be taxed in another. For example, New York taxes clothing items under $110, but items above that price are tax-free. Pennsylvania taxes most clothing but exempts items like work gloves or safety glasses. If you're unsure whether a specific item is taxed where you live, check your state's tax agency website or ask the cashier before you pay.
How sales tax applies to online and mail orders
Online retailers are now required to charge sales tax on purchases shipped to most states, even if the retailer is located elsewhere. This rule changed gradually over several years as states updated their laws. Large online sellers like Amazon now collect sales tax in all states that have it. Smaller sellers may have different rules depending on their location and sales volume.
If you order from a small business or out-of-state seller that doesn't charge sales tax at checkout, you may be required to pay "use tax" — a tax on items you bring into your state from outside. In practice, most consumers don't pay use tax because it's not automatically collected. However, if you're audited or report it on your tax return, you could owe it. Check your state's tax agency for guidance on use tax if you make frequent out-of-state purchases.
Sales tax on services and digital goods
Services are taxed differently than physical goods, and the rules vary widely by state. Some states tax all services; others tax only specific ones like haircuts, repairs, or entertainment. A few states don't tax services at all. Digital goods — software, apps, e-books, streaming subscriptions, and online courses — are increasingly subject to sales tax, but the rules are still inconsistent across states.
Restaurant meals are almost always taxed, though some states exempt certain prepared foods or tax them at a lower rate. Takeout and delivery may be taxed differently than dine-in meals depending on your state. If you're running a small business or selling services, understanding your state's rules is important because you may be required to collect and remit sales tax.
How to find your local sales tax rate
Your state's sales tax rate is published on your state's Department of Revenue or Tax Commissioner website. Search "[your state] sales tax rate" to find the official page. The rate listed there is the statewide rate, but your actual rate may be higher if your county or city adds a local tax on top.
To find your exact total rate, including local taxes, enter your address or zip code into your state's tax rate lookup tool — most states offer this. You can also ask a local retailer or call your county tax assessor's office. Many online calculators exist, but the official state website is the most reliable source.
Sales tax on groceries and food
Most states exempt groceries — unprepared food you cook at home — from sales tax. However, the definition of "groceries" varies. Prepared foods, hot foods, and items eaten in the store are usually taxed. Candy, soda, and snack foods fall into a gray area; some states tax them as groceries, others as prepared foods.
Restaurant meals, fast food, and food from a deli counter are taxed in nearly all states. Some states offer a lower tax rate on groceries instead of a full exemption. Louisiana, for example, taxes groceries at a lower rate than other goods. If you're on a tight budget and want to know exactly what's taxed, check your state's list of taxable and exempt foods.
Frequently Asked Questions
Do I have to pay sales tax on everything I buy?
No. Groceries, prescription medications, and some medical devices are exempt in most states. Clothing is exempt in some states but not others. The rules depend on your state and what you're buying. Check your state's tax agency website for a list of exempt items.
Why is the price on the shelf different from what I pay at the register?
The shelf price is usually the pre-tax price. Sales tax is added at checkout. The amount added depends on your location's tax rate. Some retailers show the tax-included price, but most show the pre-tax price and add tax at the register.
Do I pay sales tax when I order online from another state?
Yes, in most cases. Large retailers are required to charge sales tax based on where you live, even if they're located in another state. Some small sellers may not charge it, but you may still owe use tax to your state. Check your state's rules on out-of-state purchases.
Can I get a refund of sales tax I already paid?
Generally, no. Sales tax is final once you pay it. However, if you return an item, the refund usually includes the tax you paid. Some states offer sales tax refunds for specific situations, like items purchased for resale or certain business uses. Ask your state's tax agency if you think you may have access to.
What's the difference between sales tax and use tax?
Sales tax is collected by the seller when you buy something. Use tax is a tax you owe to your state on items you bring in from outside the state if sales tax wasn't charged. Most consumers don't pay use tax because it's not automatically collected, but it's technically owed in most states.