Using the Calculator
Choose from three calculation modes depending on what you need. Pricing products and need to add sales tax? Use the "Add Tax" mode—just enter your pre-tax price and the tax rate.
Shopping and want to know the original price before tax? Switch to "Remove Tax" mode and enter the total. Or if you see a receipt and want to know what tax rate they charged you, use "Find Tax Rate" and enter both prices.
Enter the tax rate manually or select your state from the dropdown to auto-fill the state rate. Remember, cities and counties pile on their own taxes too, so add those in the "Local Tax" field if you know them. Got multiple items at the same price? Use the quantity field—you'll see both per-item and total calculations.
Sales Tax Basics
What Is Sales Tax?
Sales tax is what you pay on top of the listed price when buying physical products.
A percentage gets added at checkout, and while you're the one paying it, the store collects it and passes it along to state and local governments. Five states don't charge sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. Alaska works differently though—while there's no state tax, some local jurisdictions charge up to 7.5%.
Calculating Sales Tax
Multiply the price by 1 plus the tax rate (as a decimal). So with 7% tax, that's price × 1.07. Want just the tax amount? Multiply the price by the tax rate as a decimal. The math is simple once you convert percentages to decimals—7% becomes 0.07, 8.5% becomes 0.085, and so on.
Working Backwards
Sometimes you have the total but need to know the original price before tax.
Receipts that only show the final amount require this approach. Divide the total by 1 plus the tax rate. With an 8% tax rate, you'd divide by 1.08 to get the pre-tax price.
State and Local Layers
State governments charge a base rate.
Then cities, counties, and special districts add their own taxes on top, which is why your total rate is the state rate plus all the local taxes combined. Look at California—the state rate is 7.25%, but Los Angeles adds another 2.25% in local taxes, bringing the total to 9.5%. If you're in a special district, it goes even higher. This is why tax rates vary significantly within the same state—your specific location determines the final rate. Two stores 10 miles apart can have different combined rates even though they're in the same state. One might be in a city with aggressive local taxes while the other sits in an unincorporated area with minimal add-ons.
Where Rates Hit Hardest
Some places have combined rates exceeding 10%.
Louisiana's Baton Rouge hits 10.55%. Arkansas's Texarkana reaches 11.5%. Alabama's Birmingham sits at 10%. Even within the same state, rates change dramatically from city to city.
Who Pays vs. Who Collects
Buyers pay the sales tax—it adds to the purchase cost. But businesses act as the middleman. They collect it at checkout and then send it to the government monthly or quarterly. They don't keep any of this money.
Tips for Handling Sales Tax
- Display prices before tax in advertising.
- Add "plus tax" to price displays, especially at retail locations where customers assume the posted price includes everything.
- Round tax to the nearest penny. Never charge fractions of a cent, even if the math says $3.476 in tax.
- For online sales, collect tax based on where the customer is located, not where you're located. Destination-based sourcing is the rule in most states.
- Keep collected tax money in a separate account.
- File returns on time—late filing penalties are steep and can easily exceed the tax you owe.
- Track nexus carefully so you only collect tax in states where you have presence there. Physical locations, employees, inventory, and sales thresholds all create nexus.
- If you're selling in multiple states, tools like TaxJar or Avalara automate rate calculations and filing. Tax rates change constantly and tracking 50 different state rules manually gets complicated fast.
- Save transaction records for 3-7 years for potential audits. States can audit you going back several years, so maintaining organized records protects you if they come asking questions.
- Watch for tax holidays in your state.
2025 State Sales Tax Rates
States Without Sales Tax
Five states don't charge sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Income tax and property tax fund their governments instead. Alaska is the exception. While there's no state tax, some local jurisdictions charge up to 7.5%. The other four truly have zero sales tax anywhere, which makes them popular for online sellers since there's less compliance paperwork.
Lowest State Rates
Colorado has the lowest state rate at 2.9%. Then you've got a bunch at 4%: Alabama, Georgia, Hawaii, and Wyoming. Louisiana charges 4.45%, Missouri 4.225%. Low state rates come with high local rates though. New York's state rate is only 4%, but combined rates in NYC hit 8.875%. What looks cheap at the state level can turn expensive once you factor in what your city and county pile on.
Where State Rates Peak
California leads with a 7.25% state rate.
Indiana, Mississippi, Rhode Island, and Tennessee all charge 7%. Add local taxes on top and shoppers in these states pay 8-10% total. Some California cities hit 10.25% combined.
National Averages
Combined rate (state plus local) averages 7.12% nationally.
State-only average is 5.14%, with local adding another 1.98%. Expect somewhere between 6-9% total sales tax on your purchases. Rates run higher in the South and West, lower in the Northeast.
Highest Combined Rates
Tennessee tops the list with an average combined rate of 9.55%. Louisiana follows at 9.52%, then Arkansas at 9.47%. These states stack high local taxes on top of their state taxes. Individual cities exceed 10% combined, which adds up fast on big purchases like furniture or electronics.
What Gets Taxed?
Physical Products
Physical products you can hold—furniture, electronics, clothing, cars—are taxable.
Prepared food from restaurants gets taxed too, along with alcohol and tobacco. There are exceptions with clothing and groceries depending on your state.
What's Exempt?
Groceries are exempt in 32 states, but we're talking about unprepared food here—the stuff you cook at home. Prescription medications are exempt almost everywhere. Medical devices and equipment get a pass too. Some states exempt clothing entirely (New Jersey, Pennsylvania, Minnesota), while others only exempt it under a certain dollar amount. Educational materials like textbooks and agricultural supplies like seeds and fertilizer are exempt when sold to farmers. The list of exemptions varies wildly by state, so what's exempt in one place might be fully taxable in another.
Services
Services are complicated.
Hawaii taxes almost all services. Washington taxes some. So landscaping, car repair, haircuts, consulting—whether you pay tax on these depends entirely on your state.
The Digital Economy
This is the fastest-changing area of sales tax law.
Some states tax downloadable software and e-books. Streaming services like Netflix and Spotify face taxes in a growing number of states. Rules change constantly as governments figure out how to tax the digital economy.
Shipping Charges
Shipping tax depends on how it's charged.
Separate optional shipping charges aren't taxed. Shipping built into the product price is. California taxes shipping when it's part of the price. New York doesn't tax separately stated shipping.
Exempt Buyers
Nonprofits with exemption certificates don't pay sales tax.
Government entities, resellers buying inventory, and manufacturers buying raw materials are exempt too. The buyer needs to provide a valid exemption certificate, which businesses must keep on file. Without that certificate, you have to charge tax. Most point-of-sale systems let you flag exempt transactions, but you'll need to maintain copies of those certificates for audits.
Sales Tax Rules for Online Sellers
Understanding Nexus
Nexus is the legal term for having enough connection to a state that you're required to collect sales tax there.
It comes in two types: physical and economic.
Physical Nexus
Physical nexus covers the obvious things: offices, warehouses, employees, and contractors in a state. It also includes inventory stored there, even if it's in an Amazon FBA warehouse. Drop-shipping from a location in the state counts too. Even selling at a trade show for one day can create nexus. Physical presence in a state equals definite nexus. The rules are broad, and states interpret them aggressively because they want that tax revenue.
Economic Nexus After Wayfair
Before 2018, you only had to collect sales tax in states where you had a physical presence. The Supreme Court's South Dakota v. Wayfair decision changed everything. States can now require you to collect tax based purely on your sales volume in that state, even with zero physical presence. This happened in 2018 and transformed online sales tax compliance overnight. Small sellers who'd never worried about multi-state taxes suddenly had to track sales by state and monitor thresholds.
Thresholds vary by state.
Most set the bar at $100,000 in revenue or 200 transactions per year. Some states use a higher $500,000 threshold. Once you cross that line, you're required to register and start collecting tax in that state.
Marketplace Tax Collection
Amazon, eBay, Etsy, and Walmart Marketplace handle the tax collection for you in most states. Marketplace sales are covered. You only need to worry about collecting tax on sales from your own website, which simplified life considerably for small sellers.
Multi-State Compliance
Nexus in 10 states means registering in all 10, collecting the right rates for each, and filing 10 separate returns every month or quarter. Many sellers use Amazon FBA for this reason—Amazon handles the tax. Tax software like TaxJar or Avalara automates rate calculations and filing if you're going it alone.
Staying Compliant
Track where you have nexus first.
Then register for a sales tax permit in those states—registration is free. Collect the right tax rate based on where your customer is located. This is called destination-based sourcing. File returns and send in the tax monthly, quarterly, or annually depending on the state and your volume. Keep all your records for 3-7 years in case of audits. If you're selling in more than a handful of states, hiring a CPA or using tax software makes life much easier. The rules are complex and mistakes are costly.
Tax-Free Shopping Days
Tax Holiday Basics
Some states offer tax holidays—specific days or weekends when you can buy certain items without paying sales tax.
Back-to-school holidays in late July or early August cover clothing, school supplies, and computers. Coastal states have hurricane preparedness holidays where generators, batteries, and emergency supplies are tax-free. Some states also have holidays for energy-efficient appliances. These events are designed to give consumers a break and encourage spending during specific seasons.
Which States Offer Tax Holidays?
Texas leads with three or more tax holidays each year. Florida offers 2-3 annually. Tennessee, Virginia, and Ohio have multiple holidays as well. California, New York, and the Northeast don't offer any tax holidays. The states that do participate tend to use them as an economic stimulus tool and a way to help families save on essential purchases.
The Economic Debate
Retailers welcome tax holidays because they drive foot traffic.
States lose revenue in the short term but argue the economic boost makes up for it. Whether these holidays increase overall spending or just shift when people buy things is debatable.