You buy a $100 jacket and the register says $109.75. You buy the same jacket twenty miles away and pay $108.25. If you have ever wondered what is sales tax, who decides the rate and why it keeps changing, this guide explains how sales tax works in the US, what is taxable, and how to find the right rate for any address.
Key takeaways
- Sales tax is a tax on retail sales of goods and some services, added at checkout and paid by the buyer.
- There is no federal sales tax. 45 states and Washington, DC charge a statewide sales tax.
- Counties, cities and special districts often add their own rates, so the combined rate depends on the exact location.
- The seller collects the tax and sends it to the state revenue department.
What Is Sales Tax?
Sales tax is a consumption tax charged as a percentage of the price when you buy taxable goods or services at retail. The business that makes the sale adds the tax to your bill, collects it from you, and later remits it to the state. You never file a sales tax return as a shopper; the retailer does that.
Because it is charged on the final sale to the consumer, sales tax is different from a value-added tax (VAT), which many other countries collect at each stage of production. The US has no national sales tax or VAT. Every sales tax you pay is a state or local tax.
How Sales Tax Works in the US
Sales tax in the US is layered. The rate you pay is the sum of every taxing authority that applies at the place of sale:
- State rate: set by the state legislature and applied statewide. Statewide rates range from 2.9% in Colorado to 7.25% in California.
- County rate: added by the county in many states.
- City rate: added by the city or town.
- Special district rates: transit, stadium, library or other districts that add a small rate inside set boundaries.
Each of these is a separate local tax jurisdiction. Add them up and you get the combined sales tax rate, which is the number that matters at the register. That is why a single state can have hundreds of different rates.
Combined sales tax rates in major US cities
Here is how the layers add up in a few large cities, based on official state rate files in effect in September 2026:
| City | State rate | Local rates | Combined rate |
|---|---|---|---|
| Los Angeles, CA | 7.25% | 2.5% | 9.75% |
| Houston, TX | 6.25% | 2% | 8.25% |
| New York City, NY | 4% | 4.875% | 8.875% |
| Seattle, WA | 6.5% | 4.05% | 10.55% |
| Chicago, IL (Cook County) | 6.25% | 4.25% | 10.5% |
You can see the full breakdown for each location on our sales tax rates by state pages, or look up any city or ZIP code with the sales tax calculator.
Who Pays Sales Tax and Who Collects It?
The buyer pays sales tax, but the seller is responsible for collecting it. A business that sells taxable items must register with the state revenue department, charge the correct rate, keep records, file returns and send the money to the state, usually monthly or quarterly.
Businesses that buy products to resell do not pay sales tax on those purchases. Instead, they give the supplier a resale certificate (often tied to their seller’s permit or resale permit), and the tax is collected later from the final customer.
When a seller does not collect tax on a taxable purchase, the buyer may owe use tax instead. Use tax is the companion to sales tax and usually has the same rate.
What Is Taxable? Taxable Items vs. Exempt Items
Each state decides what counts as a taxable item, so the rules vary more than the rates. In general:
- Tangible personal property such as electronics, furniture, cars and household goods is taxable in every state with a sales tax.
- Groceries are exempt or taxed at a reduced rate in many states. Virginia, for example, taxes food for home consumption at a reduced 1% rate.
- Prescription drugs are exempt in nearly every state.
- Clothing for everyday wear is exempt in a few states, including Pennsylvania, New Jersey and Minnesota, although accessories such as jewelry and handbags are usually taxable.
- Services such as haircuts, repairs or software subscriptions are taxable in some states and exempt in others.
- Sales for resale and sales to many nonprofits and government agencies are exempt when the buyer provides a valid exemption certificate.
Where Is the Sale Taxed? Origin vs. Destination
Most states tax a sale based on where the buyer receives the item. This is called destination-based sourcing. If you order online and ship to your home, the rate for your address applies. A few states use origin-based rules for some in-state sales, meaning the seller’s location sets the rate. Rules also change: in 2026, Pennsylvania moved the local sales taxes in Philadelphia and Allegheny County to a destination basis.
Real-World Example: Buying a $1,000 Laptop
Here is what the same $1,000 purchase costs in three places:
- Los Angeles, CA (9.75%): $1,000 × 0.0975 = $97.50 tax, total $1,097.50
- Houston, TX (8.25%): $1,000 × 0.0825 = $82.50 tax, total $1,082.50
- Portland, OR (no sales tax): $0 tax, total $1,000.00
That $97.50 difference is why it pays to know which states have no sales tax and how to calculate sales tax yourself.
Conclusion: What Is Sales Tax, in One Sentence
So, what is sales tax? It is a state and local tax on retail purchases, collected by the seller at checkout, with a combined rate that depends on exactly where the sale happens. To see the rate for a specific address, use our sales tax calculator or browse rates by state, and confirm important purchases with your state revenue department.
Frequently Asked Questions
Is there a federal sales tax in the US?
No. The US does not have a national sales tax or VAT. Sales tax is set and collected by states and local governments.
Which state has the highest state sales tax rate?
California has the highest statewide rate at 7.25%. With local taxes, combined rates in some California cities are above 10%.
Why is the sales tax on my receipt higher than the state rate?
Your receipt shows the combined rate, which adds county, city and special district taxes to the state rate. Two stores in the same state can charge different rates because they are in different local tax jurisdictions.
Do I pay sales tax on online purchases?
Usually, yes. Since the 2018 Supreme Court decision in South Dakota v. Wayfair, large online sellers and marketplaces collect sales tax based on your shipping address in every state that has a sales tax.
Is sales tax deductible on my federal tax return?
If you itemize deductions, you can choose to deduct state and local sales taxes instead of state and local income taxes, subject to the federal limit on state and local tax (SALT) deductions. Check current IRS rules or ask a tax professional.