If you’re selling goods in the US you’ll need to know how to calculate sales tax for your state and local area.
This guide covers how to find sales tax information for your business with our smart sales tax lookup. If you’re trading internationally, we’ll also touch on how to save on currency costs using your Wise business account
Sales tax is levied at a state and local area. 45 states, as well as the District of Columbia, use state sales taxes. Local sales taxes can also be applied, which may mean you need to calculate a combined sales tax for your specific area.
Sales taxes vary widely. Aside from the 5 states which do not charge any sales taxes at all, there are also states like Colorado with lower sales tax rates at 2.9%, through to states like California and Rhode Island which add 7% or more on to sales. And of course, there may also be local sales taxes to consider on top of this, depending on your location.
Some goods – especially essentials like groceries and clothing – may be exempt from sales taxes. However, if sales taxes apply to the goods you’re selling, you’ll need to collect them, and remit the money to the state and local government on a monthly or quarterly basis.
Sales tax can be made up of state sales tax and a local sales tax which is based on the specific area such as a city or county rate.
If you’re selling goods in the US you’ll need to work out what the sales tax rate is for your specific location. It’s then up to the seller to add this cost on top of the cost of goods being sold.
If you’re selling online, you’ll need to check the rules for your location – which can be complex. In most cases, states require you to charge sales tax if you have a sales tax nexus in that state. That may mean it’s your own home state, or you have a warehouse there for example. Some states set the sales tax based on where the seller is – this is known as origin based tax sourcing. Others require you to charge according to where the customer is – destination based tax sourcing.
The sales tax is then collected from the customer, and sent to the state and local authorities according to their collection schedule. That will usually mean you have to remit sales taxes on a monthly or quarterly basis, and keep robust records showing your transaction history.
| State | Rate range | State | Rate range | State | Rate range |
|---|---|---|---|---|---|
|
4% - 11% |
4.45% - 11.45% |
4.5% - 11.5% |
|||
|
Alaska |
0% - 7.5% |
5.5% |
Oregon |
0% |
|
|
5.6% - 11.2% |
6% |
6% - 8% |
|||
|
6.5% - 11.5% |
6.25% |
7% |
|||
|
7.25% - 10.25% |
6% |
6% - 9% |
|||
|
2.9% - 11.2% |
6.875% - 8.375% |
4.5% - 6.5% |
|||
|
6.35% |
7% - 8% |
7% - 10% |
|||
|
Delaware |
0% |
4.225% - 10.1% |
6.375% - 8.25% |
||
|
District of Columbia |
6% |
Montana |
0% |
4.7% - 8.7% |
|
|
6% - 8% |
5.5% - 7.5% |
6% - 7% |
|||
|
4% - 9% |
4.6% - 8.265% |
4.3% - 7% |
|||
|
4% - 4.5% |
New Hampshire |
0% |
6.5% - 10.4% |
||
|
6% - 9% |
6.63% |
6% - 7% |
|||
|
6.25% - 11% |
5.125% - 9.0625% |
5% - 5.6% |
|||
|
7% |
4% - 8.875% |
4% - 6% |
|||
|
6% - 8% |
4.75% - 7.5% |
Puerto Rico |
10.5% |
||
|
6.5% - 10.6% |
5% - 8.5% |
||||
|
6% |
5.75% - 8% |
State sales tax rates vary, and there are several factors you’ll need to consider.
Firstly, check if the products you’re selling are subject to sales tax at all. Some specific goods have a reduced sales tax rate, or have state sales tax waived entirely. This is decided at a state level, so you’ll need to find more information from your local Department of Revenue.
Next, if you sell online you’ll need to establish whether sales tax in your area is set according to the location of the seller or the buyer – this is known as origin based, or destination based tax sourcing.
Finally, look up the local tax rate for the area you need, to get the state, county and city sales tax rates, and calculate a combined sales tax for your products. You can do this easily with our handy sales tax lookup tool.
5 states do not charge any state level sales tax – these are Alaska, Delaware, Montana, New Hampshire and Oregon. You’ll still need to check if there are local sales taxes which apply to your specific location within the state.
The lowest state sales tax is in Colorado (2.9%). Sales tax remains relatively low in Alabama, Georgia, New York, Wyoming and Hawaii at 4%. On the flip side, California, Rhode Island, Tennessee, Indiana and Mississippi each collect 7% or more in sales tax.
Local sales taxes can mean the total you need to collect is higher than this. Use the helpful lookup tool provided here to find the right combined sales tax for your state and local area.
You’ll need to pay sales taxes to your local and state authorities according to their remittance schedule. This may mean sending in a payment every month or every quarter. Check with your state Department of Revenue for more information about the rules in your area.
You’ll usually need to get a sales tax permit for your state when you start your business. In many states this can be done online – and you shouldn’t start selling until you have completed the process. Find the rules in your state on the state Department of Revenue website.
You may be able to deduct the amount you pay as a consumer in local and state sales tax when you file your federal taxes. However, there are rules surrounding this, and usually you can only deduct either local sales taxes or local income tax. Check out the details carefully before you complete your tax filing.
