Sales tax is a percentage added to the price of goods and services at the point of sale

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 your state or local government. The tax is calculated as a percentage of the item's price. If an item costs $100 and the sales tax rate is 7%, you pay $107 total. The seller keeps the $100 and forwards the $7 to the government.

Sales tax rates vary widely depending on where you live and what you are buying. Some states have no sales tax at all. Others charge between 4% and 10% or higher when you combine state and local rates. The same item can cost different amounts in different places because of these rate differences.

Key Takeaways

  • Sales tax is added to the purchase price at checkout and varies by state, ranging from 0% to over 10% depending on location.
  • Not all items are taxed the same way — groceries, prescription medications, and clothing are often taxed at lower rates or not at all, depending on your state.
  • Online purchases are now subject to sales tax in most states, even when buying from out-of-state sellers.
  • The seller collects the tax from you and sends it to the state or local government on a regular schedule, usually monthly or quarterly.

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 you pay nothing. Alaska and Montana allow local governments to charge their own sales taxes, so some cities and counties in those states do collect it. New Hampshire, Delaware, and Oregon have no sales tax at any level of government.

Even in states with no sales tax, you may still pay tax on other purchases. New Hampshire and Delaware, for example, do not tax most goods but may tax services or specific items. Alaska taxes some goods but not others. If you live in or are moving to one of these states, check what specific items or services are taxed in your area.

What items are taxed and what items are not

Most states tax general merchandise — clothing, electronics, furniture, and household goods. However, many states exempt certain categories to reduce the tax burden on essential items. Groceries and food bought for home consumption are not taxed in most states, though prepared food from restaurants and takeout usually is. Prescription medications are exempt from sales tax in nearly all states, but over-the-counter medicines and vitamins are often taxed.

Clothing is taxed in most states, but some states exempt it entirely or only tax items above a certain price. Services like haircuts, repairs, and professional fees are handled differently by each state — some tax them, others do not. Digital goods like e-books, streaming subscriptions, and software downloads have varying tax treatment depending on your state. Check your state's tax rules if you are unsure whether a specific purchase will be taxed.

How sales tax is calculated and collected

The seller calculates sales tax by multiplying the item price by the tax rate. If you buy a $50 shirt in a state with 8% sales tax, the math is $50 × 0.08 = $4, so your total is $54. When multiple items are purchased, tax is usually calculated on the subtotal before any discounts are applied. Some states allow discounts to be subtracted first, then tax is applied to the reduced amount — the rules vary.

The seller collects the tax from you at the register or during checkout and holds it temporarily. On a regular schedule — usually monthly or quarterly — the seller sends all collected sales tax to the state revenue department or local tax authority. Large retailers file and pay electronically; small businesses may file on paper. The seller is responsible for sending the correct amount, so if they fail to do so, the government pursues them, not you.

Sales tax on online and out-of-state purchases

For many years, online shoppers could avoid sales tax by buying from out-of-state sellers. This changed after a 2018 Supreme Court decision. Now most states require online retailers to collect and send sales tax, even if the seller is located in another state. Major retailers like Amazon, Walmart, and Target collect sales tax on nearly all purchases, regardless of where you live or where they ship from.

Smaller online sellers may not yet be required to collect sales tax in your state, depending on their sales volume and your state's rules. If you buy from a small out-of-state seller and no sales tax is collected, you may technically owe "use tax" — a tax on items you bring into your state for use. In practice, most states do not pursue individual consumers for use tax on small purchases, but the obligation exists. If you are unsure whether tax was collected on an online purchase, check your receipt or the seller's website.

The difference between sales tax and other taxes

Sales tax is different from income tax, which is taken from your paycheck based on how much you earn. Sales tax is paid only when you buy something, and the amount depends on the price of the item, not your income. You may also encounter excise tax on specific items like gasoline, alcohol, and cigarettes — these are separate taxes added on top of sales tax and are usually higher because the government wants to discourage their use.

Property tax is another separate tax paid by homeowners and renters (through rent) based on the value of real estate. Value-added tax (VAT), used in many countries outside the United States, works similarly to sales tax but is collected at each stage of production rather than only at the final sale. Understanding which tax applies to which purchase helps you budget and understand your total cost.

How to find your state's sales tax rate

Your state's revenue or taxation department website lists the current sales tax rate for your area. Search "[your state] sales tax rate" to find the official page. The rate shown is usually the combined state and average local rate. Your actual rate may be slightly different if your city or county charges an additional local tax on top of the state rate.

If you are shopping online or planning a purchase in another state, you can look up that state's rate the same way. Keep in mind that rates change occasionally and may be different for different categories of goods. Some states adjust their rates annually, so if you saved an old rate in your notes, verify it is still current before relying on it for budgeting.

Frequently Asked Questions

Do I have to pay sales tax on everything I buy?

No. Most states exempt groceries, prescription medications, and some medical equipment from sales tax. Many states also exempt clothing or tax it at a lower rate. The items that are taxed and the rates vary by state, so check your state's rules for the specific items you buy.

Why do I see different prices online and in stores?

The advertised price is usually before tax. When you check out, sales tax is added based on your location. Online stores now collect this tax, so your final price should be similar whether you shop in person or online, assuming you are in the same state.

Can I get a refund of sales tax I already paid?

Generally, no. Sales tax is final once you complete the purchase. If you return an item and get a refund, the sales tax is refunded as part of that refund. If you paid sales tax on an item by mistake — for example, if it should have been exempt — contact the seller or your state's tax office to request a refund.

Do I owe sales tax when I buy something out of state and bring it home?

Technically, you may owe "use tax" on items purchased out of state and brought into your home state. However, most states do not actively pursue individuals for use tax on personal purchases. If you buy from a seller in another state and no sales tax is collected, the obligation exists but is rarely enforced for small purchases.

Is sales tax the same everywhere in my state?

No. Most states allow cities and counties to add their own local sales tax on top of the state rate. Your total rate depends on your specific location. Two cities in the same state can have different rates. Check your receipt or your local government's website to see your exact rate.