State rates, combined state-plus-local averages, and common exemptions (food, clothing, prescription drugs). How sales tax is actually calculated and collected.
Sales tax is a consumption tax charged on the sale of goods and certain services. In the United States there is no national sales tax; instead, 45 states plus the District of Columbia levy a statewide sales tax, and thousands of local jurisdictions — counties, cities, and special districts — may add their own rates on top. Only five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. (Alaska permits local sales taxes, so a few of its boroughs still charge one.)
The tax is almost always collected by the seller at the point of sale and remitted to the state tax authority. Most states use a "destination-based" rule, meaning the rate that applies is the one where the buyer receives the goods, which is why online retailers now charge different sales tax depending on your shipping address. A handful of states, including California for some transactions, use origin-based sourcing instead.
At the register, the calculation is a single multiplication applied to the taxable subtotal:
Total = Price × (1 + Sales Tax Rate)
Because rates are layered — a state rate plus a county rate plus a city rate — the combined rate a shopper actually pays is often several points higher than the headline state figure. This is why two stores in the same state can charge noticeably different sales tax.
State-level sales tax rates vary by more than a factor of two across the country. The table below shows the highest and lowest statewide rates alongside the states that charge no sales tax at all. These figures are the state base rate only; local add-ons are not included here.
| State | State sales tax rate |
|---|---|
| California | 7.25% (highest statewide) |
| Indiana, Mississippi, Rhode Island, Tennessee | 7.00% |
| Kentucky, New Jersey | 6.625% |
| New York | 4.00% |
| Colorado | 2.90% (lowest statewide) |
| Alaska, Delaware, Montana, New Hampshire, Oregon | No state sales tax |
A high state rate does not always mean the highest total tax, because local rates matter just as much. Tennessee has a 7% state rate, and many of its counties push the combined total above 9.5%. Conversely, Colorado's 2.9% state rate is low, but cities such as Denver add several local taxes that bring the combined rate near 8% or more.
Because local jurisdictions stack their own taxes on the state base, the combined rate that shoppers actually pay can be far higher than the state figure. According to the Tax Foundation, the average combined state and local sales tax rate across the United States is roughly 6.5% to 7%, but in some jurisdictions it exceeds 10%.
| City | Approximate combined rate |
|---|---|
| Chicago, IL | 10.25% |
| Seattle, WA | 10.25% |
| Birmingham, AL | 10.00% |
| Los Angeles, CA | 9.50% |
| New York City, NY | 8.875% |
| Dallas, TX | 8.25% |
The highest combined rates in the country tend to appear in parts of Louisiana, Tennessee, Alabama, and Arkansas, where state, county, city, and special-purpose district taxes layer on top of one another. When budgeting for a large purchase, always look up the combined rate for the specific delivery address rather than the state rate, since the difference can be several percentage points.
Not everything you buy is taxable. States carve out exemptions for policy reasons, and the specifics differ from state to state. Understanding the common exemptions helps explain why your grocery bill and your electronics bill carry very different effective tax rates.
Exemptions can also be temporary. Many states hold annual "sales tax holidays" — often in late summer for back-to-school clothing, footwear, and supplies — during which certain items are tax-free up to a dollar limit. These windows shift from year to year, so check your state's department of revenue for the current schedule before a major purchase.
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