Last updated: April 15, 2026 · 10 min read
Sales tax is one of the most common — and most confusing — costs you encounter in everyday life. Every time you buy groceries, fill up your gas tank, or shop online, sales tax adds to your total. But how much? That depends on where you live, what you're buying, and sometimes even how you're paying. This guide breaks down how sales tax works, how to calculate it accurately, and what you need to know about rates across the United States.
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Calculate Sales Tax Now →Sales tax is a consumption tax imposed by state and local governments on the sale of goods and certain services. When you make a purchase, the retailer collects the tax at the point of sale and remits it to the government. Unlike income tax, which is based on what you earn, sales tax is based on what you spend.
In the United States, there is no federal sales tax. Instead, each state sets its own rate, and local jurisdictions (cities, counties, special districts) can add their own rates on top. This is why the total sales tax rate can vary significantly even within the same state.
Calculating sales tax is straightforward with the right formula:
For example, if you're buying a $200 item in a state with a 6.5% sales tax rate:
Sometimes you know the total price including tax and need to figure out the original price. This is called "backing out the tax":
For example, if your receipt shows $107 and the tax rate is 7%:
Sales tax rates vary dramatically across the United States. Here's a snapshot of state-level rates (as of 2026). Keep in mind that local taxes may push the combined rate higher:
| State | State Rate | Notes |
|---|---|---|
| California | 7.25% | Highest state rate; local add-ons common |
| Indiana | 7.00% | Single rate statewide |
| Mississippi | 7.00% | Single rate statewide |
| Rhode Island | 7.00% | Single rate statewide |
| Tennessee | 7.00% | Reduced rate on groceries |
| Minnesota | 6.875% | No local add-ons |
| Nevada | 6.85% | County add-ons vary |
| New Jersey | 6.625% | Urban Enterprise Zones offer reduced rates |
| Washington | 6.50% | High local add-ons in some areas |
| Texas | 6.25% | City/county add-ons common |
| Illinois | 6.25% | Local add-ons vary widely |
| Massachusetts | 6.25% | Most items taxed at single rate |
| Colorado | 2.90% | Low state rate; high local add-ons |
| Alaska | 0% | No state tax; local taxes up to 7.5% |
| Delaware | 0% | No sales tax at all |
| Montana | 0% | No sales tax at all |
| New Hampshire | 0% | No sales tax at all |
| Oregon | 0% | No sales tax at all |
Understanding the three layers of sales tax is crucial:
For example, in Chicago, Illinois, you might pay:
Not everything is taxed at the full rate. Many states offer exemptions or reduced rates for certain categories:
Grocery tax treatment varies significantly by state:
A common question is whether sales tax applies to the original price or the discounted price. The answer is clear: sales tax is calculated on the price you actually pay, after all discounts and coupons are applied.
If a jacket costs $150 but you have a 20% off coupon:
This applies to manufacturer coupons, store coupons, loyalty discounts, and most other price reductions. However, manufacturer rebates received after purchase don't reduce the taxable amount at the time of sale.
The landscape of online sales tax changed dramatically in 2018 with the Supreme Court's decision in South Dakota v. Wayfair, Inc. This ruling overturned the previous "physical presence" standard and established that states can require online retailers to collect sales tax based on economic nexus.
What this means for consumers:
If you run a small business that sells taxable goods or services, understanding sales tax compliance is essential:
Many states offer annual sales tax holidays during which specific items can be purchased tax-free. These typically occur in late July or early August, ahead of the back-to-school season:
Tax-free holidays can save you significant money on planned purchases, especially for families buying school supplies or upgrading technology.
To find the pre-tax price from a total, divide the total by (1 + tax rate). For example, if the total is $107 and the tax rate is 7%, the pre-tax price is $107 ÷ 1.07 = $100.
Louisiana has the highest combined state and local sales tax rate at approximately 9.55%. Several other states, including Tennessee, Arkansas, and Washington, have combined rates exceeding 9%.
Five US states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska allows local jurisdictions to levy their own sales taxes.
Sales tax is calculated on the discounted price (after coupons and discounts are applied), not the original price. You only pay tax on what you actually pay.
It depends on the state. Many states exempt groceries from sales tax, while others tax them at a reduced rate. A few states tax groceries at the full rate. Check your local regulations for specifics.
Yes. Following the 2018 Supreme Court ruling in South Dakota v. Wayfair, online retailers must collect sales tax in states where they have economic nexus, typically meaning they exceed a certain threshold of sales or transactions in that state.
State sales tax is set by the state government and applies statewide. Local sales tax is an additional tax imposed by cities, counties, or other local jurisdictions. The combined rate is what you actually pay at checkout.
Small businesses must collect sales tax on taxable goods and services sold within their state. They need to register for a sales tax permit, charge the correct rate, file periodic returns, and remit collected taxes to the state.
Sales tax affects virtually every purchase you make, and understanding how it works can save you money and help you budget more accurately. Whether you're a consumer trying to calculate your total at the register or a business owner managing tax compliance, having the right tools makes all the difference. Use our free sales tax calculator to get instant, accurate results for any state and any purchase amount.
Sources: Tax Foundation, IRS