How sales tax is calculated in 17 U.S. states
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When customers buy something in the U.S., the sticker price typically won’t be the final price they pay. Customers may need to pay an extra charge at the checkout called sales tax.
Sales tax is a fee that most businesses must pay to their state or municipality on top of their earnings, which they pass on to the customer at the point of sale. How much they’ll charge depends on which state and city the business operates in.
Calculating sales tax can be complex because the rate also depends on your location and what product or service you’re selling. Some products are exempt, while others require a higher sales tax.
In this article, we’ll help you understand the obligations for sales tax by state.
How sales tax is calculated
In the U.S., sales tax is charged on most goods and services so states can fund public schools, infrastructure, emergency services and public transportation.
No matter what state your business is operating in, the formula for calculating sales tax will be the same:
Product selling price x sales tax rate percentage
If a business is based in a state with a 7% sales tax rate and sells software for $1,000, every transaction will be liable for $70 in sales tax. When this tax is added to the final price, the customer will pay $1,070 for the software.
If your business operates in several states, you must also consider the sales tax nexus. This is a rule that states you may be subject to the sales tax of one state even if your headquarters are in another state.
Whether you need to collect sales tax at all depends on what you’re selling, as not all products and services are subject to sales tax laws. Most states provide exemptions for things like groceries and utilities, but they’ll tax items like restaurant food bills, consulting services and digital products.
Each state also has different tax return rules for sales tax, which means you’ll need to check…
When to file. Depending on where your business operates, tax information will need to be gathered and filed monthly, quarterly or annually.
How to file. Some states will have electronic filing options in place, while others require you to send tax forms through the mail.
How to pay. Check to see if you can pay using a credit or debit card or if you’ll have to write a check.
The best way to ensure your tax filings are accurate is to research the state(s) your business operates in and calculate any base sales tax rates or minimum combined sales tax rates you are liable for.
How to calculate sales tax in California
California base sales tax rate: 6%
Mandatory local sales tax rate: 1.25%
Minimum combined sales tax rate: 7.25%
Return and payment due dates: Monthly or quarterly
The state of California has several sales tax rates to be aware of.
The base sales tax rate in the state is 6%, and there is also a mandatory 1.25% local rate in place, taking the total minimum combined sales tax rate to 7.25%.
The local tax rate to add to the base rate will depend on the county and city you’re in and some have a higher rate than 1.25%. For example, Los Angeles County has a minimum combined sales tax rate of 9.5%, but some municipalities within L.A. county, such as Santa Monica, charge 10.25%.
You may be exempt from California’s sales tax altogether, depending on what you sell. The state doesn’t require you to pay it on certain food products, groceries, prescription medicine or medical devices.
An example of how to calculate sales tax in Los Angeles, California:
Consultancy services ($1,000) x L.A. sales tax rate (9.5%) = $1095.00
How to calculate sales tax in Florida
Florida base sales tax rate: 6%
Return and payment due dates: Monthly
Florida has base sales tax rates and local tax rates to consider if your business sells products there.
The state’s base sales tax rate is 6%, with local tax rates up to 2%. Some localities don’t charge a combined sales tax rate, so if you are operating in one of these, you’ll only be liable to pay the 6% base rate.
Florida offers many exemptions and reductions to its sales tax. Commercial real estate property leases are only subject to a 5.5% sales tax and amusement rides pay as little as 4%. Utilities like electricity and gas and even some custom software sales are exempt from the tax.
An example of how to calculate sales tax in Miami, Florida:
Haircut ($100) x Miami sales tax rate (7%) = $107.00
How to calculate sales tax in Texas
Texas base sales tax rate: 6.25%
Return and payment due dates: Monthly, quarterly or annually
If your business operates in Texas, be prepared to pay a base sales tax rate of 6.25%.
The tax is imposed on most items, including retail products, building leases and services. Some cities and counties in Texas also have a local tax rate, taking the state’s maximum combined sales tax rate to 8.25%.
If you construct a new building, your labor may be exempt from sales tax. Like Florida, utilities like gas and electricity are exempt from Texas’s sales tax liabilities.
An example of how to calculate sales tax in Austin, Texas:
Burger and fries ($10) x Austin sales tax rate (8.25%) = $10.83
How to calculate sales tax in New Jersey
New Jersey base sales tax rate: 6.625%
Return and payment deadlines: Monthly or quarterly
New Jersey puts a 6.625% base tax on most sales, including digital products and personal property.
Certain products like food, clothes, machinery and prescription drugs qualify for an exemption certificate from New Jersey’s sales tax. Some services like hotel rooms are taxed at a lower rate of 5%, while the state’s Urban Enterprise Zones rate is 3.3125% to encourage private investment in urban areas.
An example of how to calculate sales tax in Atlantic City, New Jersey
Box of saltwater taffy ($20) x Atlantic City sales tax rate (6.625%) = $21.32
How to calculate sales tax in New York State
New York base sales tax rate: 4%
Return and payment deadlines: Monthly, quarterly or annually
New York has one of the lowest base sales tax rates for a large state at just 4%.
The caveat is the local tax rates charged by New York’s cities and counties. For example, sales tax in New York City can be as high as 8.875%, the highest in the state. There’s also an additional sales tax rate of 0.375% for taxable sales made within the Metropolitan Commuter Transportation District (MCTD), taking in Manhattan, Brooklyn, Queens, Staten Island, Rockland, Nassau, Suffolk, Putnam, Orange, Dutchess and Westchester.
Most food and medicines are exempt from the tax, along with charitable organizations and government agencies.
An example of how to calculate sales tax in New York City, New York:
Broadway tickets ($100) x NYC sales tax rate (8.875%) = $108.88
How to calculate sales tax in Virginia
Virginia base sales tax rate: 5.3% (varies)
Return and payment deadlines: Monthly or quarterly
As with other states, the amount of sales tax you’ll pay in Virginia will vary depending on the city you’re working in. Central and Northern Virginia have a sales tax rate of 6%, while James City County, Williamsburg and York County tax a higher rate of 7%.
There are some statewide exemptions to the tax. Groceries and personal hygiene products are capped at 2.5%, and businesses operating in industries like agriculture or running a nonprofit may be completely exempt.
An example of how to calculate sales tax in Richmond, Virginia:
Laptop ($1,000) x Richmond sales tax rate (6%) = $1,060.00
How to calculate sales tax in Massachusetts
Massachusetts base sales tax rate: 6.25%
Return and payment deadlines: Monthly, semi-monthly, quarterly or annually
The sales tax in Massachusetts is 6.25% and is the same rate across the state.
Consumers won’t pay any sales tax on products like furniture, home appliances, groceries, gasoline and clothing. However, businesses are required to charge sales taxes on tangible personal property, even if a customer orders online or over the phone.
An example of how to calculate sales tax in Springfield, Massachusetts:
Pair of jeans purchased online ($70) x Springfield sales tax rate (6.25%) = $74.38
How to calculate sales tax in Pennsylvania
Pennsylvania base tax rate: 6%
Return and payment deadlines: Semi-monthly, monthly, quarterly or semi-annually (business owners must file quarterly in their first year of business)
Pennsylvania’s base sales tax rate is 6%.
However, there are some exceptions. By law, purchases in Allegheny Country are subjected to a 1% local tax and in Philadelphia, it’s 2%. Products like furniture, motor vehicles and home appliances are subjected to the sales tax, while clothes, gasoline and groceries are exempt.
An example of how to calculate sales tax in Philadelphia, Pennsylvania:
Television ($1,000) x Philadelphia sales tax rate (8%) = $1,080.00
How to calculate sales tax in Arizona
Arizona base tax rate: 5.6%
Return and payment deadlines: Depending on tax liability, businesses can file monthly, quarterly, seasonal, or annually.
Arizona’s sales tax rates can be one of the more difficult states to calculate. Along with a base sales tax rate of 5.6%, cities also assess use tax through what is known as the state transaction privilege tax (TPT).
The rate depends on where you are selling products from. Phoenix has one of the highest minimum combined sales tax rates in the state at 8.6% and some areas are as high as 11.2%.
There are some benefits to operating in Arizona. Nonprofit organizations are generally exempt from the TPT, and groceries, medicine and some types of research and development won’t pay the sales tax.
An example of how to calculate sales tax in Superior, Arizona:
iPad Mini ($500) x Superior sales tax rate (11.2%) = $556.00
How to calculate sales tax in Connecticut
Connecticut base sales tax rate: 6.35%
Return and payment deadlines: Monthly, quarterly or annually
The base sales tax rate in Connecticut is 6.35%. Unlike many other states on our list, there are no local tax rates added on top of it.
The state’s sales tax applies to retail sales, taxable services and rental leases, while the sales of groceries and prescriptions are exempt. Connecticut does require businesses to pay sales tax on labor like building contractors or computer specialists when they are part of a “taxable service”.
An example of how to calculate sales tax in Hartford, Connecticut:
Plumber ($200) x Hartford sales tax rate (6.35%) = $212.70
How to calculate sales tax in Georgia
Georgia base sales tax rate: 4%
Return and payment deadlines: Monthly, quarterly or annually
Georgia has one of the lower base sales tax rates on our list at 4%.
Depending on the county, local tax rates range from 0% up to 5%, meaning businesses could be liable for a combined sales tax rate of 9%. Many services such as repair labor are subject to a sales tax exemption in Georgia, but individual transport, accommodation and sales of property are all liable.
For example, if your business sells a $100 item and charges $20 for delivery, Georgia’s sales tax is imposed on the entire $120.
An example of how to calculate sales tax in Savannah, Georgia:
Refrigerator ($1,000) x Savannah sales tax rate (7%) = $1,070.00
How to calculate sales tax in Tennessee
Tennessee base sales tax rate: 7%
Return and payment deadlines: Monthly, quarterly or annually
Tennessee’s base sales tax rate is 7% and local tax rates can climb as high as 3%.
The sales tax is usually applied to services like hotels, telecommunications and specified digital products such as computer software and maintenance contracts. Small businesses that earn less than $10,000 in taxable sales in a county or municipality are exempt from the state tax where they’re operating.
An example of how to calculate sales tax in Memphis, Tennessee:
Computer technician ($100) x Memphis sales tax rate (9.75%) = $109.75
How to calculate sales tax in Colorado
Colorado base sales tax rate: 2.9%
Return and payment deadlines: Depending on tax liability, businesses can file monthly, quarterly, seasonal or annually
Colorado has a low base sales tax rate of 2.9%.
The combined tax rates in the state can be as high as 11.2%. A business operating in Denver, for example, must charge a combined sales tax rate of 8.81%.
Several services and products are given an exemption from Colorado’s sales tax, including food, farm equipment, energy and machinery.
An example of how to calculate sales tax in Denver, Colorado:
Headphones ($100) x Denver sales tax rate (8.81%) = $108.81
How to calculate sales tax in Minnesota
Minnesota base sales tax rate: 6.88%
Return and payment deadlines: Monthly, quarterly or annually
Minnesota’s base sales tax rate sits at 6.88%, with local tax rates falling anywhere from 0% to 1.5%.
Some services in Minnesota are exempt from the tax, while physical products like clothes, gasoline and vehicles are subjected to it.
An example of how to calculate sales tax in Minneapolis, Minnesota:
New sofa ($1000) x Minneapolis sales tax rate (8.03%) = $1080.30
How to calculate sales tax in Washington
Washington base sales tax rate: 6.5%
Return and payment deadlines: Monthly, quarterly or annually
Washington’s base state sales tax rate is 6.5%, with combined sales tax rates reaching 10.4% depending on where you live.
The tax is placed on most items, including sales of tangible personal property, and there are also new requirements around remote sales (e.g. products sold online). Services like consultants and hairdressers can apply for an exemption certificate to avoid this tax, but others, like hotels, are liable to pay it.
An example of how to calculate sales tax in Seattle, Washington:
Ebook ($10) x Seattle sales tax rate (10.25%) = $11.03
How to calculate sales tax in Illinois
Illinois base sales tax rate: 6.25%
Return and payment deadlines: Monthly, quarterly or annually
The base sales tax rate in Illinois is 6.25%, but it’s nearly double in some localities.
The state’s minimum combined tax rates range from 6.25% to 11%. The sales tax in Chicago is 10.25%, while businesses operating in River Grove are liable for 11% sales tax. Real estate, stocks and bonds are all exempt from the tax, along with real estate development materials, machinery and newspapers.
An example of how to calculate sales tax in Chicago, Illinois:
Washing machine ($500) x Chicago sales tax rate (10.25%) = $551.25
How to calculate sales tax in Nevada
Nevada base sales tax rate: 4.6%
Return and payment deadlines: Monthly or quarterly
The base sales tax rate in Nevada is 4.6%, with localities adding on additional taxes up to 3.665%. The minimum combined sales tax rate in Las Vegas is the highest rate in the state at 8.38%.
Like other states, Nevada has exemptions on specific products and services. People buying machinery, groceries and medicine are all exempt from paying the tax.
An example of how to calculate sales tax in Las Vegas, Nevada:
Car rental ($1,000) x Las Vegas sales tax rate (8.38%) = $1,083.80
States without sales tax
Most states have sales tax to help generate tax revenue for operations, but there are some exceptions.
Five U.S. states currently have no sales tax:
Alaska. Local governments in Alaska decide whether to impose sales taxes instead of a statewide tax. Depending on the location, the tax rate ranges between 3% to 7.85%.
Montana. Montana doesn’t have a statewide imposed sales tax, but some municipalities with a large tourism industry impose a local tax on sales of goods. The state does have higher property taxes as an alternative way to raise funds.
Delaware. The state of Delaware, including individual taxing jurisdictions, does not impose a sales tax. However, businesses operating in Delaware need to be aware of another business tax the state implements called a Gross Receipts Tax, which applies to most goods and services.
Oregon. While Oregon has no statewide sales tax, it has one of the highest income tax rates in the country, along with hefty property tax rates to raise funds.
New Hampshire. Businesses operating in New Hampshire are exempt from sales tax, but they may still feel the pinch as the state has one of the highest property tax rates in the country.
Final Thoughts
Sales tax laws in the U.S. can be complicated, but it’s important to do your research so you know what your business is liable for.
While some states like Connecticut have a blanket sales tax rate, others like California have multiple base and combined rates you need to be aware of. Calculating sales tax and your business’ liabilities all comes down to the products and services you’re selling and what municipality you’re operating in.
If you are liable for sales tax, using a quick calculation will help you figure out what your business needs to pay when it’s time to file.
(These tax calculations were compiled in February 2022 and may not have been updated.)
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