Sales tax on any given purchase is determined by three things working together: where the sale takes place or ships to, whether the item is taxable in that place, and the combined rate of every level of government with authority over that location. State rates alone run from 2.9% to 7.25%, but county, city, and special-district add-ons can push a combined rate above 10%.1Tax Foundation. State and Local Sales Tax Rates, 2026 Five states charge no statewide sales tax at all. Everything else about how much tax appears on a receipt comes from how those three factors interact.
How the Rate Is Built From Stacked Layers
The percentage on a receipt is rarely a single rate. A state sets its base rate, and then counties, cities, and sometimes special districts add their own percentages for local priorities like transit, school bonds, or stadium financing. That is why the same item can cost slightly more at a store across a city line.
Colorado has the lowest non-zero state rate at 2.9%, and California’s is the highest at 7.25%. Local add-ons reshape the picture. Louisiana averages the highest combined rate in the country at 10.11%, driven by parish surcharges layered onto a 5% state rate. Tennessee, Washington, Arkansas, and Alabama all average above 9% once local rates are counted.1Tax Foundation. State and Local Sales Tax Rates, 2026 Local rates change frequently, so the rate on a given address today may not be the rate a year from now.
Five states impose no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Alaska is the only one of the five that lets local governments charge their own sales taxes, and some Alaska localities do. Purchases in the other four states carry zero general sales tax at any level.1Tax Foundation. State and Local Sales Tax Rates, 2026
Whose Rate Applies When Buyer and Seller Are Apart
When the buyer and seller are in different places, sourcing rules decide which location’s rate governs. Roughly 35 states use destination-based sourcing: the rate follows the buyer’s shipping address. If you order online and have something delivered home, you pay your own local combined rate. About 11 states use origin-based sourcing for in-state sales: the rate is set by the seller’s location, so every shipment from a warehouse in a 7.5% city carries 7.5% to buyers elsewhere in that state.
For consumers, destination-based sourcing is why online purchases now generally match what a nearby store would charge. The exact rate depends on the specific address, not just the zip code, because city and district lines do not always follow postal boundaries.
Whether the Seller Has to Collect at All
A seller only collects sales tax in states where it has “nexus,” the legal connection that gives a state authority to impose collection duties. Before 2018, nexus almost always meant a physical presence: a storefront, warehouse, or employee in the state. The Supreme Court’s decision in South Dakota v. Wayfair, Inc. allowed states to require collection based on economic activity alone, even from sellers with no physical footprint.2Cornell Law School Legal Information Institute. South Dakota v. Wayfair Inc. – Certiorari to the Supreme Court of South Dakota
Every state with a sales tax has since adopted some form of economic nexus. The most common threshold is $100,000 in annual sales into the state. Many states originally paired that with a 200-transaction trigger, but the transaction count has been fading fast. As of 2026, roughly 15 states still use it; the rest have moved to dollar-amount thresholds only.3Streamlined Sales Tax. Remote Seller State Guidance Physical nexus still matters on its own: an office, inventory sitting in a fulfillment center, or an employee working remotely from a state can independently create a collection duty regardless of sales volume.
Once a seller crosses a state’s threshold, it must register for a sales tax permit, begin collecting on taxable sales into that state, and file returns on the state’s schedule. If a seller has no nexus in the buyer’s state, no state tax is collected at the register. That does not always mean the tax is owed by nobody, as the section on use tax below explains.
When the Platform Handles It for You
If a purchase happens through Amazon, eBay, Etsy, Walmart Marketplace, or a similar platform, the platform almost certainly handles sales tax collection. Nearly every state with a sales tax has enacted marketplace facilitator laws that shift the collection duty from the individual seller to the platform itself.4Streamlined Sales Tax. Marketplace Facilitator State Guidance The platform calculates the correct rate for the buyer’s address, collects it, and remits it to each state.
For a small seller, this has quietly removed a large compliance burden. A person selling handmade goods on Etsy does not need to register in dozens of states. The platform does that work. Sales made through a seller’s own website or at in-person events are not covered, though, and remain the seller’s responsibility if nexus exists.
Whether the Item Itself Is Taxable
A rate only matters if the item is subject to tax in the first place. Tangible goods are taxable in virtually every state that has a sales tax. Services are handled state by state: some states tax a broad range of services, while others tax almost none unless a statute specifically says so.
Many states carve out essentials. Groceries are the most common example. A majority of states either fully exempt unprepared food or tax it at a reduced rate. Prescription medications are widely exempt. Clothing gets special treatment in some states, including full exemptions up to a per-item price cap. These carve-outs are why a grocery receipt and an electronics receipt from the same store show different tax lines.
Digital Goods and Streaming
Roughly 40 states now impose some form of sales tax on digital products like e-books, downloaded music, and streaming subscriptions, but the rules vary. Some states tax downloaded files but not streaming access to the same content. Others treat them the same.5National Conference of State Legislatures. Taxation of Digital Products
Cloud software sits on shakier ground. The Streamlined Sales Tax agreement treats prewritten software delivered electronically as tangible personal property, but that definition does not easily extend to software accessed through a browser without any download. States that want to tax cloud services generally have to classify them as taxable services, which not all have done.5National Conference of State Legislatures. Taxation of Digital Products
One federal boundary applies across the board: the Internet Tax Freedom Act permanently bars state and local taxes on internet access itself and prohibits discriminatory taxes that single out online commerce for higher rates than equivalent offline transactions.6Congress.gov. Internet Tax Freedom Act A monthly broadband bill cannot carry a sales tax. What you stream over the connection is a separate question, and in most states it can be taxed.
Exempt Buyers and Resale
Some buyers are removed from sales tax regardless of the item. Nonprofits, government agencies, and tribal entities commonly qualify for exemptions, and the buyer usually has to present a valid exemption certificate at the time of purchase for the seller to keep on file.
Resale exemptions keep the same product from being taxed twice as it moves through the supply chain. A wholesaler selling inventory to a retailer collects no tax if the retailer provides a resale certificate. Tax is collected once, at the final sale to the end consumer. That structure is how sales tax remains a consumption tax rather than compounding at each step of distribution.
When the Buyer Owes the Tax Directly
If a seller does not collect sales tax, the obligation does not disappear. It shifts to the buyer as use tax. Use tax applies at the same rate as sales tax and covers purchases where the seller had no nexus or otherwise did not charge tax. A classic example is buying furniture from an out-of-state retailer with no presence in your state.2Cornell Law School Legal Information Institute. South Dakota v. Wayfair Inc. – Certiorari to the Supreme Court of South Dakota
Most states include a line on the individual income tax return for reporting use tax on untaxed purchases from the prior year. Consumer compliance is low, but the obligation is legally enforceable, and businesses face stricter audit scrutiny on their untaxed purchases. Marketplace facilitator laws have narrowed the everyday scope of consumer use tax by pulling most large online platforms into direct collection, but it still applies to purchases from smaller independent sellers, out-of-state transactions, and items bought while traveling.