Table of Contents
Table of Contents

Sales Tax by State

Whenever you buy something in the U.S., odds are it's going to cost more than the listed price. This is likely the result of the sales tax levied against the cost of your purchase. Sales tax is one of the ways governments collect tax revenue from their citizens.

The sales tax rate varies by the state and local government in which the purchase is made. As of 2021, 45 states, the District of Columbia, and Puerto Rico require a sales tax on many goods and some services. According to our research, Alaska, Delaware, Guam, Montana, New Hampshire, and Oregon do not levy a statewide or territory sales tax (although they may selectively tax certain purchases like alcohol or hotel rooms). A sales tax, even when levied by a local municipality such as a city, is generally administered by the state.

While most states have a "general" sales tax that's used across all purchases, some items, such as tobacco, alcohol, and motor fuels, have a unique "selective" tax rate that also varies by state.

Key Takeaways

  • When you purchase something in most places in the United States, a sales tax is added to the sticker price that must be paid by the consumer.
  • Sales taxes are used to raise revenues by states and local municipalities, although these vary from jurisdiction to jurisdiction.
  • Forty-five states, Washington, D.C., and Puerto Rico levy sales taxes on most goods and services, often as a fixed percentage of the purchase price.

As part of the 2022 midterm elections, a ballot measure was defeated in Arizona that would have created a 0.1% sales tax for 20 years to provide funding for the state's fire districts.

What Are Sales Taxes?

A sales tax is an involuntary fee imposed by the government on the sale of goods and services, calculated as a percentage of the price of a purchase.

For instance, if you were to buy a $15 T-shirt in Pitt County, N.C., you might expect to pay an additional $0.71, as the state's sales tax rate is 4.75% (0.0475 x 15 = 0.71). However, a state's sales tax rate only accounts for a portion of the full amount levied against a purchase, which can also include a county rate, a city rate, or an excise rate. Some locations even levy a "sin" rate on items such as cigarettes or gambling. Pitt County, in particular, levies a sales tax plus a use tax rate of 2.25%. That means the T-shirt will actually cost you an extra $1.05 above the list price (0.07 x 15 = 1.05).

Sales taxes are levied at the point of sale, after which they are passed on to the government by the collecting retailer. In most cases, sales taxes are only paid by the consumer. That's because the various manufacturers who create the products possess a resale certificate from the government. This ensures that they aren't considered end-users.

Sales Taxes and You

When creating a monthly budget, take into account the full price of goods and/or services, including the sales tax. Additionally, if you buy something online, you are not excluded from owing sales tax. But you might be able to get around this--it depends on your local laws and whether or not the business has nexus (i.e., a physical presence) in a nearby location. Since 2018, most states have enacted laws requiring online retailers making sales to their residents to collect sales tax regardless of their address.

Also, should you purchase something while traveling, the ultimate price you pay will probably differ from what you might expect at home. However, when making a significantly large purchase in a different jurisdiction (on the assumption that the item in question will be used when you are back home), you may have to pay your state's use tax, which is typically set at the same rate as local sales taxes.

Although regularly ignored by many consumers, those who purchase goods outside their states of residence but use the goods in their residence states, generally are subject to their jurisdictions' use taxes and are legally obligated to pay such taxes directly.

Article Sources
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  1. Tax Foundation. "Sales Tax Definition."

  2. Tax Foundation. "State and Local Sales Tax Rates, Midyear 2022."

  3. Government of Puerto Rico, Department of the Treasury. "Sales and Use Tax and Tax on Imports Monthly Return," Page 1.

  4. Guam Department of Revenue and Taxation. "Guam Tax Structure."

  5. Tax Policy Center. "The State of State (and Local) Tax Policy: How Do State and Local Sales Taxes Work?"

  6. Ballotpedia. "Arizona Proposition 310, Sales Tax for Fire District Funding Measure (2022)."

  7. North Carolina Department of Revenue. "Sales and Use Tax Rates Effective October 1, 2022."

  8. Pitt County Development Commission. "Taxes: Pitt County, North Carolina," Select "General State and Local Taxes."

  9. Congressional Research Service. "'Amazon Laws' and Taxation of Internet Sales: Constitutional Analysis," Pages 2-3, 5-6.

  10. U.S. Government Accountability Office. "Remote Sales Tax: Initial Observations on Effects of States' Expanded Authority."

  11. U.S. Supreme Court. "South Dakota v. Wayfair, Inc., et al."

  12. Accounting Tools. "Use Tax Definition."