State sales tax is a key source of revenue for U.S. states, funding public services such as education, transportation, and healthcare. Each state sets its own sales tax rate and rules, resulting in a wide variety of requirements nationwide.
How State Sales Tax Works
When you purchase taxable goods or services, the retailer adds the state sales tax to your purchase price. This tax is calculated as a percentage of the sale amount. For example, if a state has a 6% sales tax and you buy a $100 item, you pay $106 total.
Sales tax rates vary significantly among states, ranging from 0% in states like Oregon, Montana, New Hampshire, and Delaware (which do not impose statewide sales tax) to over 7% in states like California and Indiana. Additionally, many states allow local governments (cities, counties) to impose their own sales taxes that add to the overall rate paid by consumers.
Taxable Goods and Services
Most tangible personal property—such as clothing, electronics, and furniture—is subject to sales tax. However, tax rules vary by state; some states exempt groceries, prescription drugs, or services like repairs and digital products.
Exemptions and Special Rules
States often provide exemptions for specific goods or purchasers. Common exemptions include:
- Food for home consumption (exempt in many states)
- Prescription medications
- Some clothing items
- Nonprofits and government entities
Businesses must carefully understand which sales are taxable and which are exempt in their state to comply with local laws.
Filing and Remitting Sales Tax
Retailers and businesses with a sales tax collection obligation must register with their state’s tax authority. They file periodic sales tax returns—usually monthly or quarterly—and remit the collected tax.
Online Sales Tax
With the rise of e-commerce, states have increased efforts to collect sales tax on online purchases. Following the 2018 Supreme Court ruling in South Dakota v. Wayfair, states can require out-of-state sellers to collect and remit sales tax if they meet economic nexus thresholds.
Resources for More Information
For the most accurate and updated information about state sales tax, consult your state’s department of revenue or taxation website. The IRS also provides guidance on sales tax issues and federal implications.
Learn more about related topics like Use Tax and Sales Tax Filing on FinHelp.io to better understand your tax obligations.
For detailed federal guidelines, visit the IRS website: IRS.gov.