How Sales Tax Works in the United States
The sales tax calculator handles all three common sales tax problems: adding tax to a pre-tax price, reverse-calculating the pre-tax price from a total, and finding an unknown rate. Sales tax is a consumption tax levied by state and local governments — there is no federal sales tax in the U.S., making it one of the most variable costs by location.
State vs. Combined Sales Tax Rates
Sales tax rates have two components: the state rate set by state legislature, and local rates added by counties and cities. The state of Texas has a 6.25% rate, but Houston adds 2% locally for a combined 8.25%. Always use the combined rate for your specific location when making purchasing decisions. Most states publish official combined rate tables.
States with No Sales Tax
Five states have no state-level sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska. Alaska allows local jurisdictions to impose sales tax, so rates vary by city. These zero-rate states are attractive for major purchases — some people even travel to Oregon to buy electronics or vehicles to avoid sales tax.
Items Exempt from Sales Tax
Most states exempt certain goods and services from sales tax. Common exemptions include groceries (fully exempt in 32 states), prescription medications (exempt in virtually all states), agricultural supplies, and certain clothing in some states (notably New York exempts clothing under $110 per item). Online purchases from out-of-state sellers are technically subject to use tax but enforcement varies.
Business Implications
Businesses that sell taxable goods or services must collect and remit sales tax to their state revenue department. Sales tax nexus rules determine which states require collection — having employees, inventory, or offices in a state typically creates nexus. Since the 2018 South Dakota v. Wayfair Supreme Court ruling, economic nexus (exceeding $100,000 in sales or 200 transactions) also triggers collection obligations.