Which States Have Sales Tax and How They Differ

Everyone · Explainer · Updated October 1, 2026 · LearnLife Editorial

What Exactly Is Sales Tax?

Sales tax is a percentage fee charged on the sale of most goods and some services, collected by the seller at the point of purchase and then sent to the state or local government. This tax helps fund public services like schools, roads, public safety, and parks. For example, if you buy a $40 backpack and the sales tax rate is 6%, you pay $42.40 total—the extra $2.40 is the sales tax.

Sales tax applies mainly to tangible personal property, such as clothes, electronics, or furniture. However, some services—like car repairs, hotel stays, or digital downloads—may also be taxable depending on the state. Essential items like groceries or prescription medications are often exempt or taxed at a lower rate, though this varies.

The total sales tax you pay can include state, county, city, and special district taxes, combined into one percentage. Some states have a base rate and allow local governments to add additional sales taxes, which can create a wide variety of rates within the same state.

How Does Sales Tax Work? A Detailed Example

Imagine you live in a state with a base sales tax rate of 5%, and your city adds 2%, making a total of 7%. You decide to buy a new smartphone priced at $600. To calculate the sales tax:

1. Multiply $600 by 7% (or 0.07): $600 × 0.07 = $42.
2. Add that to the purchase price: $600 + $42 = $642.

So, your total cost is $642.

Now, suppose you also buy a pair of socks at a local store that only charges the state rate of 5% because the city tax doesn’t apply to clothing. The socks cost $15:

1. Multiply $15 by 5% (or 0.05): $15 × 0.05 = $0.75.
2. Total cost: $15 + $0.75 = $15.75.

This example shows how different items in the same place can have different tax rates depending on local rules.

For online shopping, sales tax can be more complex. If you purchase from a retailer with a physical presence in your state, they usually collect sales tax at checkout. If the retailer is out-of-state, they may not collect tax unless they meet specific sales or transaction thresholds. In that case, you might owe "use tax" and must report it on your state tax return.

Which States Have Sales Tax and Which Don’t, and Why?

Out of the 50 U.S. states, 45 impose sales tax, while five do not: Alaska, Delaware, Montana, New Hampshire, and Oregon. Each of these no-sales-tax states funds government services through other means such as higher income or property taxes.

Alaska is unique because it has no state-level sales tax but allows local governments to impose sales taxes. This means some cities or boroughs in Alaska charge sales tax while others do not.

States with sales tax vary widely in their base rates. For example:

Besides the base rate, local governments often tack on additional sales taxes. For instance, a city may add 1-3%, increasing the total sales tax to 9% or more. This can impact where people choose to shop, especially for large purchases.

Why Should You Care About Sales Tax?

Sales tax affects your wallet every time you shop for taxable goods or services. Knowing the sales tax rules in your state and locality can help you budget better and avoid surprises. For example, if you plan to buy a big-ticket item like a refrigerator, knowing the exact sales tax rate can influence when and where you shop.

Sales tax differences also matter when shopping online or out of state. If a retailer doesn’t collect sales tax, you may still owe use tax in your home state. For example, if you buy a $500 laptop online from a state with no sales tax collection requirement for small sellers, you might have to report and pay use tax to your state to stay compliant.

Businesses need to understand sales tax to collect, report, and remit it properly. Failure to comply can lead to penalties and fines. For individuals, being aware of sales tax rules can help you recognize when you need to report use tax or understand the total cost of purchases.

What Other Terms Are Often Confused With Sales Tax?

Several tax terms are sometimes mixed up with sales tax:

• Use Tax: This tax applies to goods purchased out of state or online when sales tax was not collected by the seller. It is usually the same rate as sales tax and must be reported and paid by the buyer directly to their state tax authority.

• Excise Tax: This tax is levied on specific goods such as gasoline, tobacco, and alcohol. Unlike sales tax, excise taxes are often included in the price and not added at checkout.

• Value-Added Tax (VAT): Common in many countries outside the U.S., VAT is a tax collected at each stage of production or distribution, rather than just at final sale. The U.S. does not use VAT for retail sales.

Understanding these distinctions helps you recognize your tax responsibilities and avoid confusion when budgeting or filing taxes.

How Do State Sales Taxes Differ Beyond Just the Rate?

Beyond rates, states differ in important ways:

• Taxable Items: Some states exempt groceries, clothing, or prescription drugs. For example, Pennsylvania exempts most groceries, while California taxes many prepared foods.

• Tax on Services: Many states do not tax most services, but some tax specific ones like landscaping, telecommunications, or digital products.

• Sales Tax Holidays: Several states offer tax-free days or weekends where certain items, like school supplies or clothing, can be purchased without paying sales tax. These events are usually timed for back-to-school shopping.

• Thresholds for Online Sellers: States may require online sellers to collect sales tax only after they surpass a sales volume or number of transactions in that state. For example, a state might require sales tax collection only if a seller makes over $100,000 in sales or 200 transactions annually.

• Filing and Payment Requirements: Businesses must file sales tax returns periodically (monthly, quarterly, or annually) depending on their sales volume and state rules.

Here is a sample comparison table of taxable items in different states:

*California exempts most unprepared food but taxes some groceries; New York exempts most clothing under $110.

What Steps Should You Take to Handle Sales Tax Properly?

Whether you’re a consumer or a business, here are concrete steps to manage sales tax:

1. Check Your State’s Official Website: Visit your state’s department of revenue or taxation site to find current rates, rules, and exemptions. These sites often have calculators and guides.

1. Calculate Sales Tax When Budgeting: Use the rate to add expected sales tax to your planned purchases to avoid surprises at checkout.

1. Know When You Owe Use Tax: If you buy items from out-of-state sellers who don’t collect sales tax, check your state’s rules. You may need to report and pay use tax on your return.

1. For Businesses, Register and Collect Properly: If you sell taxable goods or services, register with your state tax authority, collect the correct sales tax, and keep detailed records.

1. Keep Track of Filing Deadlines: Businesses must file returns and remit collected taxes regularly. Missing deadlines can result in penalties.

1. Look for Tax Holidays: Plan major purchases during state tax holidays to save money on specific items.

1. Seek Assistance When Needed: If you’re unsure, contact your state tax agency or consult tax advisors. Resources such as Where to Get Sales Tax Help provide guidance.

By following these steps, you can better manage your sales tax responsibilities and avoid unexpected costs or penalties.

Frequently asked questions

Are all online purchases subject to sales tax?

Not always. If the seller has a physical presence or meets sales thresholds in your state, they usually must collect sales tax. Otherwise, you might owe use tax directly to your state.

Do sales tax rates change often?

Sales tax rates can change as states or localities adjust them. Check your state’s official resources regularly to stay updated.

Can I get a refund on sales tax if I’m a visitor?

A few states offer sales tax refunds for non-residents, but most do not. Check state policies if you’re traveling or making large purchases as a visitor.

How do tax holidays work?

States designate specific days or weekends where sales tax is waived on selected items, often school supplies or clothing. These holidays vary by state and year.

What happens if I don’t pay use tax?

Although enforcement varies, failing to pay use tax when required can result in penalties or interest if audited by your state tax agency.