Question 1

How is US sales tax calculated?

Accepted Answer

US sales tax is calculated by multiplying the pre-tax purchase price by the combined tax rate for your location. The combined rate equals the state tax rate plus any applicable local, county, or city tax rates. For example, if you buy a $100 item in Los Angeles County, California, the state rate is 7.25% and the county adds 2.25%, giving a combined rate of 9.5% — so you pay $9.50 in tax for a total of $109.50.

Question 2

Which US states have no sales tax?

Accepted Answer

Five US states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska allows local jurisdictions to levy their own sales taxes, so some areas in Alaska do charge sales tax at the local level. If you live in or shop in these states, you generally pay no sales tax on purchases, which can result in significant savings on large purchases like electronics or vehicles.

Question 3

What is the highest sales tax rate in the US?

Accepted Answer

The highest combined state and local sales tax rates in the US can exceed 10%. Tennessee, Louisiana, and Arkansas have some of the highest combined average rates. The highest individual combined rates are found in specific cities — for example, parts of Alabama and Louisiana can have combined rates above 11%. California has the highest statewide base rate at 7.25%, though local additions bring the combined rate to around 10.25% in some cities.

Question 4

Do I have to pay sales tax on online purchases?

Accepted Answer

Yes, following the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require online retailers to collect sales tax even if they have no physical presence in the state. Most major online retailers now collect and remit sales tax based on the shipping destination. If a retailer does not collect sales tax, the buyer is technically required to pay "use tax" directly to their state — though enforcement varies.

Question 5

What is the difference between sales tax and VAT?

Accepted Answer

Sales tax is a single-stage tax collected only at the final point of sale to the consumer, while VAT (Value Added Tax) is collected at every stage of production and distribution. In the US sales tax system, only the end consumer pays; businesses do not pay sales tax on items purchased for resale. With VAT (used in the UK, EU, and most other countries), each business in the supply chain charges VAT but can reclaim VAT paid on inputs, so the net tax burden falls on the final consumer.

Question 6

Are groceries taxed in the US?

Accepted Answer

Grocery taxation varies by state. Most states exempt unprepared groceries (basic food items) from sales tax, but some states like Alabama, Mississippi, and South Dakota tax groceries at the full sales tax rate. A few states tax groceries at a reduced rate — for example, Virginia taxes groceries at 1% versus its 4.3% general rate. Prepared foods, restaurant meals, and candy are typically taxed at the standard rate in most states.

Question 7

How do local sales tax rates work?

Accepted Answer

Local sales tax rates are additional taxes levied by counties, cities, or special districts on top of the state sales tax rate. Not all states allow local sales taxes — states like Connecticut and Indiana have a single statewide rate. In states that do allow them, the local rate depends on the specific jurisdiction where the sale occurs. For online purchases, the rate is typically based on the delivery address. Combined rates (state + local) can vary significantly even within a single state.

US Sales Tax Calculator — Calculate Tax by State