US Sales Tax Guide

What's the key thing to understand about Sales Tax Basics?

Unlike VAT in the UK/EU, US sales tax is added AT the register, not included in the displayed price. Total cost is always higher than the sticker price. Sales tax is collected by the state (and sometimes by city/county) where the sale occurs — not where the seller is based. For online purchases, sales tax is typically based on the buyer's shipping address (post-Wayfair v. South Dakota 2018). Five states have NO state sales tax: Alaska, Delaware, Montana, New Hampshire, Oregon. Note Alaska has local sales taxes in some municipalities despite no state-level tax, so a purchase there can still incur tax depending on exactly where it's made.

What should I know about Combined Rates Are What Matter?

Headline state rate often understates total. Examples of combined rates (state + average local): Louisiana 9.55%, Tennessee 9.55%, Arkansas 9.46%, Washington 9.40%, Alabama 9.29%, California 8.85%, Oklahoma 8.99%. Lower combined rates: Maine 5.5%, Wyoming 5.36%, Wisconsin 5.43%, Hawaii 4.5% (technically GET, not sales tax), Alaska 1.76%. Where you live (or where you have your items shipped) makes a meaningful difference. A $50,000 car purchase: 1.76% Alaska = $880 tax. 9.55% Louisiana = $4,775 tax — a difference of nearly $3,900 on an identical purchase, purely down to which state the sale takes place in.

What's the key thing to understand about Common Exemptions?

Most states exempt or reduce tax on essentials. Grocery food: fully exempt in many states (CA, CT, FL, IL — many others). Reduced rate (1-3%) in AR, MO, IL, TN. Fully taxed: AL, MS, SD, HI. Prescription drugs: exempt in all 50 states with sales tax. Over-the-counter medications: varies by state. Clothing: fully exempt in MN, NJ, PA, VT. Exempt up to $175/item in MA. Otherwise taxable. Some states have annual sales tax holidays — typically back-to-school weekends in Texas, Florida, Virginia, Oklahoma, South Carolina, and Alabama, where clothing, school supplies, and sometimes computers are temporarily exempt from sales tax for a limited window each year.

What do I need to know about Online Shopping and Sales Tax?

Before 2018, online retailers only collected sales tax if they had physical presence in the buyer's state. South Dakota v. Wayfair (June 2018) changed this — states can now require online sellers to collect sales tax based on economic nexus (typically $100k+ sales or 200+ transactions in the state per year). Amazon, Walmart, eBay, Etsy now collect sales tax in all states with sales tax. Small sellers (under threshold) may not. Tax-free shopping online is increasingly rare — but possible from genuinely small, independent sellers operating below their state's economic nexus threshold, though this is an increasingly narrow exception.

Not financial advice. This calculator is for general information and education only. Figures are estimates and may not reflect your circumstances. For decisions, consult the FCA register and a qualified financial adviser. See our editorial standards.

US Sales Tax Calculator (by State)

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