Sales tax is a percentage added to the price of goods when you buy them
Sales tax is money you pay to your state or local government when you purchase something at a store, restaurant, or online. The tax is calculated as a percentage of the item's price and added to your bill at checkout. You do not pay it upfront — it appears on your receipt after the price is rung up.
The percentage varies by location. Some states have no sales tax at all. Others charge between 4 and 10 percent, depending on the state and sometimes the county or city where you live. A few states tax groceries differently than clothing or electronics. The business collecting the money — the store, restaurant, or seller — then sends it to the government.
Sales tax is different from income tax, which comes out of your paycheck. You encounter sales tax only when you spend money on a purchase. It is a tax on consumption, not on earning.
Key Takeaways
- Sales tax is added to your purchase price at the register and varies by state, county, and sometimes city.
- The seller collects the tax from you and sends it to the government, not the other way around.
- Some items are taxed differently — groceries may be untaxed while prepared food is taxed, depending on your state.
- Online purchases are increasingly subject to sales tax, even when shipped from out of state.
- The tax rate you pay depends on where the item is delivered or picked up, not where you live.
How the percentage is set and who collects it
Your state legislature sets a base sales tax rate, usually between 4 and 7 percent. Counties and cities can add their own local tax on top of that. In Louisiana, for example, the state rate is 4.45 percent, but New Orleans adds 4.5 percent more, bringing the total to 8.95 percent at checkout. In California, the state rate is 7.25 percent, but some counties add up to 2.5 percent more.
The business where you shop — whether it is a grocery store, gas station, restaurant, or online retailer — is responsible for collecting the tax from you and sending it to the state and local tax authorities. The store does not keep the money. It acts as a collector on behalf of the government.
Some states do not collect sales tax at all. Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax. However, some cities or counties in those states may still charge a local tax. If you live in or are visiting one of these states, you will not see sales tax added at most registers.
What is and is not taxed
Most states tax clothing, electronics, furniture, and other goods. However, many states do not tax groceries — items like bread, milk, vegetables, and meat bought from a supermarket. The reasoning is that groceries are necessities, and taxing them would burden lower-income households more heavily.
Prepared food is usually taxed, even in states that do not tax groceries. A sandwich you buy ready-made at a deli counter is taxed. A loaf of bread you buy from the shelf is not. A restaurant meal is taxed. A frozen pizza you cook at home is not.
Prescription medications are typically not taxed in most states, but over-the-counter medicines often are. Services — haircuts, car repairs, plumbing — are usually not taxed, though some states tax certain services. The rules vary significantly by state, so what is taxed where you live may differ from a neighboring state.
Sales tax on online purchases
For many years, online retailers did not charge sales tax unless they had a physical location in your state. That changed in 2018 when the U.S. Supreme Court ruled that states could require online sellers to charge sales tax even without a store or warehouse in that state. Most large retailers — Amazon, Walmart, Target — now charge sales tax on online orders based on where the item is being delivered.
Smaller online sellers and marketplaces have different rules depending on the state and the platform. Some states require all online sellers to charge tax. Others have thresholds — a seller must charge tax only if they exceed a certain amount of sales in that state in a year. Check your state's tax authority website to understand the rules where you live.
When you order online, the sales tax is calculated at checkout and shown on your receipt, just as it would be in a physical store. The rate depends on the delivery address, not your home address or where the seller is located.
How sales tax affects your budget
Sales tax increases the final cost of everything you buy. A $100 item in a state with 8 percent sales tax costs $108 at the register. Over time, this adds up. If you spend $500 a month on taxable items in a state with 7 percent sales tax, you pay $35 per month in sales tax — or $420 per year.
The impact is not equal across income levels. A person earning $30,000 per year spends a larger percentage of their income on taxable purchases than someone earning $100,000. This makes sales tax a regressive tax — it takes a larger share from lower-income households. Some states offset this by not taxing groceries or by offering tax breaks on certain items during specific times of year.
When you are budgeting or comparing prices between states, remember to factor in sales tax. An item that seems cheaper in one state may cost more after tax is added.
Sales tax rates by state
The following table shows the statewide sales tax rate in each state as of 2024. Keep in mind that local taxes can add significantly to these rates, and some states have different rates for different types of items.
| State | Statewide Rate |
|---|---|
| Alabama | 4% |
| Arizona | 5.6% |
| Arkansas | 6.5% |
| California | 7.25% |
| Colorado | 4.63% |
| Connecticut | 6.35% |
| Delaware | No statewide tax |
| Florida | 6% |
| Georgia | 4% |
| Hawaii | 4% |
| Idaho | 6% |
| Illinois | 6.25% |
| Indiana | 7% |
| Iowa | 6% |
| Kansas | 5.7% |
| Kentucky | 6% |
| Louisiana | 4.45% |
| Maine | 5.5% |
| Maryland | 6% |
| Massachusetts | 6.25% |
| Michigan | 6% |
| Minnesota | 6.875% |
| Mississippi | 7% |
| Missouri | 4.225% |
| Montana | No statewide tax |
| Nebraska | 5.5% |
| Nevada | 6.85% |
| New Hampshire | No statewide tax |
| New Jersey | 6.625% |
| New Mexico | 5.125% |
| New York | 4% |
| North Carolina | 4.75% |
| North Dakota | 5% |
| Ohio | 5.75% |
| Oklahoma | 4.5% |
| Oregon | No statewide tax |
| Pennsylvania | 6% |
| Rhode Island | 7% |
| South Carolina | 7.5% |
| South Dakota | 4.5% |
| Tennessee | 9.55% |
| Texas | 6.25% |
| Utah | 4.85% |
| Vermont | 6% |
| Virginia | 5.3% |
| Washington | 6.5% |
| West Virginia | 6% |
| Wisconsin | 5% |
| Wyoming | 4% |
These rates are the statewide base. Your actual rate at checkout will be higher if your county or city adds a local tax. To find your exact rate, search "[your city] sales tax rate" or visit your state's department of revenue website.
Frequently Asked Questions
Why is sales tax added at the register instead of shown in the price?
Prices on store shelves show the base price before tax because sales tax rates vary by location. A store in a city with 8 percent tax and a store in the same state with 6 percent tax would need different price tags for the same item. Showing the tax separately at checkout is simpler than printing location-specific prices.
Do I pay sales tax on groceries?
It depends on your state. Most states do not tax groceries — items like bread, milk, eggs, and vegetables. However, prepared foods, restaurant meals, and some states' definitions of "groceries" vary. Check your state's tax authority website to see what is and is not taxed where you live.
Do I have to pay sales tax on items I buy online?
In most cases, yes. Large online retailers charge sales tax based on your delivery address. Smaller sellers may or may not, depending on your state's rules and their sales volume. The tax rate applied is based on where the item is being shipped, not where you live or where the seller is located.
Can I get sales tax refunded?
Generally, no. Sales tax is final once you complete a purchase. If you return an item and receive a refund, the sales tax is refunded as part of that refund. Tourists visiting from other states cannot reclaim sales tax paid during their visit.
Why do some states not have sales tax?
States set their own tax policy. Alaska, Delaware, Montana, New Hampshire, and Oregon chose not to impose a statewide sales tax. Some of these states rely more heavily on income tax or other revenue sources. However, some cities or counties within these states may still charge a local sales tax.