Sales Tax Across US States

Unlike countries with a national VAT, the United States has no federal sales tax. Instead, sales tax is imposed at the state and local level, creating a complex patchwork of rates and rules. Sales tax is a consumption tax charged at the point of sale. The seller collects it from the buyer and remits it to the government. The tax applies to most tangible goods and some services, though exemptions vary widely by state.

Five states impose no state-level sales tax: - Alaska: No state tax, but some municipalities impose local sales tax (up to 7.5%). - Delaware: No sales tax at all. Popular for corporate registration. - Montana: No general sales tax, but resort taxes exist in certain areas. - New Hampshire: No sales tax. Attracts cross-border shoppers from neighbouring states. - Oregon: No sales tax. Funded primarily by income tax. Note: Even in these states, specific excise taxes may apply to items like gasoline, tobacco, and alcohol.

State-level rates (as of 2026): - Highest: California (7.25%), Indiana (7%), Mississippi (7%), Rhode Island (7%), Tennessee (7%) - Lowest: Colorado (2.9%), Alabama (4%), Georgia (4%), Hawaii (4%), Wyoming (4%) However, when local taxes are included, the combined rate can be much higher: - Louisiana: up to 11.45% combined - Tennessee: up to 9.75% combined - Arkansas: up to 11.63% combined - Alabama: up to 11% combined

Since the 2018 Supreme Court ruling in South Dakota v. Wayfair, states can require online sellers to collect sales tax even without a physical presence. Most states have adopted "economic nexus" thresholds: - Common threshold: $100,000 in sales OR 200 transactions in the state per year. - Sellers exceeding these thresholds must register, collect, and remit sales tax. - Marketplace facilitators (Amazon, eBay, Etsy) are required to collect tax on behalf of third-party sellers in most states. This has significantly simplified compliance for buyers but added complexity for small online sellers.