A local sales tax is a percentage charge that a city, county, or special district adds on top of any state sales tax when you buy taxable goods or certain services. Local rates run anywhere from a fraction of a percent to over 5% depending on where you are, and the combined state-plus-local rate averages about 7.53% nationally as of 2026. Five states have no state sales tax at all, and roughly a dozen more don’t allow a local layer, but most Americans pay both.
How a Local Sales Tax Works
Even though the state and local taxes show up as one line on your receipt, they’re legally separate obligations. Your county, city, or a special district imposes its own rate on purchases within its boundaries. The retailer collects everything as a single charge, then the revenue gets split and sent to each government. In most states, that money flows through the state revenue department, which redistributes the local shares back to the jurisdictions that levied them.
Because the local tax is its own thing, the same purchase can be treated differently at each level. An item might be exempt under state law but still taxable locally, or the reverse. That mismatch is where the biggest surprises come from, and it’s covered further down.
Who Can Impose One
Local taxing power comes from the state. A city or county can only levy a sales tax if the state legislature has passed an enabling statute granting the authority and setting the ground rules, including a maximum rate. Alaska is the outlier: it has no state sales tax, but its constitution gives boroughs and cities broad power to impose their own, and many do.
Counties are the most common local taxing entities. Cities and municipalities layer their own rates on top when authorized. Beyond those, special purpose districts add another possible layer. These are narrowly focused entities created to fund a specific need, such as a transit authority building a rail system, a school district financing new buildings, or a stadium authority paying off construction bonds. Each has its own rate within its defined service area, which is why two addresses in the same city can carry different totals.
Many states require voter approval before a new local sales tax takes effect. Some require a simple majority; others demand a two-thirds supermajority for taxes earmarked for a specific purpose. Once approved, new rates typically take effect at the start of the next calendar quarter after a waiting period of several months.
How the Combined Rate Adds Up
The tax on your receipt isn’t one tax. It’s every overlapping jurisdiction’s rate added together. Buy something in a city that sits inside a county that also falls within a transit district, and you could be paying four separate taxes in one transaction: state, county, city, and district. Retailers use automated tax tables keyed to exact addresses because moving a few blocks can change the total.
A quick example: a $200 item in a location with a 5% state rate, a 1.5% county rate, and a 1% city rate carries a combined 7.5% rate, so you pay $15 in tax. The retailer collects the full $15 and remits each government’s share separately.
The range across the country is wide. Louisiana has the highest average combined rate at just over 10%, driven largely by local add-ons that can exceed 7% on their own. Delaware, Montana, New Hampshire, and Oregon have no sales tax at any level. Alaska technically has no state rate, but local taxes in some boroughs push the combined rate to nearly 8%.
What’s Exempt and What Isn’t
Not everything gets taxed, but you can’t assume a state-level exemption protects you locally. If the local ordinance doesn’t explicitly adopt the same exemption, the item is still taxable at the local level. A few categories come up most often:
- Groceries. Most states exempt unprepared food from the state sales tax, but local ordinances don’t always follow. Some still tax groceries even when the state doesn’t.
- Prescription drugs and medical devices. Nearly every state exempts these at both the state and local level.
- Clothing. A handful of states exempt clothing entirely or up to a dollar threshold, but most treat it as fully taxable everywhere.
Prepared food and digital goods also get inconsistent treatment from one jurisdiction to the next. The mismatch between state and local rules is what catches people off guard, especially at the grocery register.
Which Local Rate Applies to Online Orders
For in-person purchases, the local rate is wherever the store is. Shipped goods are trickier because the seller’s location and the buyer’s location can carry very different rates. States handle this through sourcing rules that fall into two camps.
About eleven states use origin-based sourcing: the local rate is based on the seller’s location regardless of where the package ends up. The rest of the states with a sales tax use destination-based sourcing, where the rate is set by the address where the buyer receives the goods. Destination-based is the more common approach, especially for e-commerce. A few states use a hybrid model. California applies origin-based rules for its state, county, and city taxes but switches to destination-based rules for district-level taxes.
For sales that cross state lines, the 2018 Supreme Court decision in South Dakota v. Wayfair reshaped things. The Court overruled the old requirement that a seller needed a physical presence in a state before that state could require tax collection. Under the South Dakota law the Court upheld, sellers delivering more than $100,000 in goods or completing more than 200 transactions into the state in a year must collect and remit its sales tax, including the local portion.1Supreme Court of the United States. South Dakota v. Wayfair, Inc. Most states have since adopted similar thresholds, though the specific dollar amounts vary. That’s why online purchases now routinely include local tax at your delivery address.
Use Tax on Purchases That Weren’t Taxed
Use tax exists to close the gap that would otherwise let you avoid local sales tax by buying from out-of-state sellers who don’t collect it. If no sales tax was charged on something you bought, you technically owe use tax at the same combined rate you would have paid locally. Federal law defines a compensating use tax as a levy on the storage, use, or consumption of an item that complements a general sales tax.2Office of the Law Revision Counsel. 26 USC 164 – Taxes
Historically, use tax was almost unenforceable against individual consumers because states had no way to know what you bought online. Marketplace facilitator laws and post-Wayfair collection requirements have largely solved that on the business side, but use tax still matters for person-to-person purchases, out-of-country orders, and transactions with sellers too small to trigger economic nexus thresholds. Many state income tax returns include a line for self-reporting use tax, and some states estimate it for you based on your income bracket.
Deducting Local Sales Tax on Your Federal Return
You can deduct the sales tax you pay, including the local portion, on your federal income tax return if you itemize. The IRS gives you a choice: deduct either your state and local income taxes or your state and local sales taxes, but not both. The sales tax option tends to benefit people who live in states with no income tax or who made large purchases during the year.3Internal Revenue Service. Use the Sales Tax Deduction Calculator
If you go with the sales tax deduction, you can either add up every receipt from the year or use the IRS’s optional sales tax tables, which estimate the deduction based on your income, family size, and local rates. Most people use the tables and then add sales tax from big-ticket purchases like a car or boat.
There’s a cap either way. For 2026, the total deduction for all state and local taxes combined, whether income or sales taxes plus property taxes, is limited to $40,400 for most filers. Married couples filing separately are capped at $20,200. The limit starts to phase down if your modified adjusted gross income exceeds $505,000 ($252,500 for married filing separately), shrinking by 30 cents for every dollar above the threshold until it bottoms out at $10,000.2Office of the Law Revision Counsel. 26 USC 164 – Taxes