How US sales tax works
- No federal sales tax. Sales tax is set at the state level, and most states allow counties, cities and special districts to add their own layers on top of the base rate.
- Adding tax: tax = price × rate ÷ 100. A $100 sale at a combined 8% rate rings up $108.00.
- Removing tax: pre-tax = total ÷ (1 + rate ÷ 100). From a $108 total at 8%, $100 was the sale and $8 was tax.
- Five states levy no statewide sales tax — Alaska, Delaware, Montana, New Hampshire and Oregon — though Alaska municipalities may charge local tax.
Selling taxable goods across state lines? Economic nexus rules obligate remote sellers to collect tax in a state once sales there pass thresholds such as $100,000 or 200 transactions. Keep your customer billing dates on track with the invoice due date calculator, and price your catalogue with the markup calculator.
FAQ
Which states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska's cities and boroughs can still levy local sales taxes, so verify at the local level.
How do I calculate sales tax on a price?
Multiply the pre-tax price by the rate divided by 100. At 7%: $100 × 0.07 = $7.00 tax, $107.00 total.
How do I back sales tax out of a receipt total?
Divide the total by 1 plus the rate. A $107.00 receipt at 7%: $107 ÷ 1.07 = $100.00 pre-tax, so $7.00 was tax. Choose Remove tax above.
Why is checkout tax higher than the state rate?
Local add-ons. Counties, cities and special districts stack their own rates on the state base, so combined rates in large cities frequently run 2–3 points above the state rate — Seattle, for example, combines Washington's 6.5% base with local taxes for a total above 10%.
Do I charge sales tax on shipping?
It depends on the state: shipping charges are taxable in some states when the sale is taxable (New York, Texas) and exempt in others when separately stated (California generally). Check the destination state's rule.
What is use tax?
Use tax is the mirror of sales tax: when a seller did not collect tax — commonly on out-of-state or online purchases — the buyer owes the equivalent rate to their home state, usually filed on the state income tax return.
What is economic nexus for online sellers?
After the 2018 South Dakota v. Wayfair decision, states can require remote sellers above certain sales or transaction thresholds to collect their tax even without a physical presence. Common thresholds are $100,000 in sales or 200 transactions per state per year.
Is the rate different for services?
Frequently yes — most states do not tax professional services, while a handful tax specific services such as processing or repairs. Treat services as exempt until the destination state says otherwise.