Sales tax in the United States is a patchwork of state, county, and city rates that can vary dramatically depending on where you shop. Five states have no sales tax at all, while combined rates in some cities exceed 10%. Understanding your local rate is essential for budgeting, especially for large purchases like vehicles, appliances, and electronics.
Zero Sales Tax States
Five states charge no state sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska. However, Alaska allows local jurisdictions to impose their own sales taxes, so some Alaska cities do charge sales tax. The other four are truly tax-free for retail purchases.
Highest and Lowest Rate States
| Ranking | State | State Rate | Avg Combined Rate |
|---|---|---|---|
| Highest combined | Louisiana | 4.45% | 9.55% |
| 2nd highest | Tennessee | 7.00% | 9.55% |
| 3rd highest | Arkansas | 6.50% | 9.47% |
| Lowest (with tax) | Colorado | 2.90% | 7.77% |
| No sales tax | OR, MT, NH, DE | 0% | 0% |
Common Exemptions
- Groceries — Most states exempt unprepared food. Notable exceptions: Alabama, Mississippi, South Dakota tax groceries at full rate.
- Clothing — Exempt in Pennsylvania, New Jersey, Minnesota, and a few others.
- Prescription drugs — Exempt in all states.
- Tax holidays — Many states offer back-to-school or disaster preparedness weekends with reduced or no sales tax.
Calculate exact tax on any purchase with the Sales Tax Calculator, which includes state-specific rates and ZIP code lookup.
Online Sales Tax
Since the 2018 Supreme Court ruling in South Dakota v. Wayfair, states can require online retailers to collect sales tax even without a physical presence. Nearly all states with sales tax now require online collection, so the advantage of online shopping for tax avoidance has largely disappeared.
Key Takeaways
- Five states have no sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska.
- Combined rates exceed 10% in some cities due to local add-ons.
- Groceries and clothing are exempt in many but not all states.
- Online purchases are now taxed in nearly all states post-Wayfair.
Frequently Asked Questions
Which state has the highest sales tax?
By combined state and local average, Louisiana and Tennessee tie at approximately 9.55%. By state rate alone, California has the highest at 7.25%, though local additions can push combined rates even higher.
Do I pay sales tax on a car?
Yes, vehicles are subject to sales tax in all states that have sales tax. Some states offer trade-in credits that reduce the taxable amount. The rate is usually based on where you register the vehicle, not where you buy it.
Are services taxed the same as goods?
It varies widely. Most states primarily tax tangible goods. Some states also tax certain services like dry cleaning, repairs, or landscaping. Digital goods and SaaS products are an evolving area of tax law.