In the 45 states (plus the District of Columbia) that collect one, sales tax applies to almost every physical good you buy, a growing list of services, and most digital products like streaming subscriptions and downloads. What you pay sales tax on depends heavily on your state: groceries, prescription drugs, and certain clothing are exempt in many places, and combined state-and-local rates run from under 3% to more than 11% depending on the address where the sale happens.
Physical Goods Are Taxed by Default
The starting rule in every sales-tax state is simple. If you can pick it up and carry it out of the store, it’s taxable. Furniture, electronics, appliances, vehicles, jewelry, sporting goods, household supplies. The legal category is “tangible personal property,” and the default is taxable unless the legislature has specifically pulled the item out.
That default flips the burden of the question. You don’t need to check whether a new television is taxable. It is. The interesting questions are all about the carve-outs, and those exist because a legislature made a deliberate decision to create them.
Services: A Patchwork, and It’s Growing
Sales tax began as a tax on goods, and for decades services were left alone. That has shifted. States now tax things like dry cleaning, pet grooming, landscaping, auto repair labor, and gym memberships, though the pace is uneven. Some states tax fewer than 20 categories of services. Others tax well over a hundred.
When a single transaction bundles goods and services, states often apply the “true object test.” What was the customer really paying for? If the goal was the service (getting a car diagnosed, say), the tangible property that came along may not trigger tax. If the goal was the physical item, the whole charge, labor included, gets taxed. The test goes by other names in some states, including “essence of the transaction” in Texas and “dominant purpose” elsewhere, but the logic is the same.
For a repair or installation bill you receive, that means how the invoice is itemized can change the tax. Separated parts and labor are treated differently from a single lump charge in many states.
Digital Products, Streaming, and Software
Streaming subscriptions, e-book purchases, downloaded music, and digital game licenses are taxable in a growing number of states. Cloud-based software (SaaS) is one of the fastest-moving areas: some states treat a subscription as a taxable lease of software, others don’t tax it at all, and a few are still working out their position.
One thing stays tax-free everywhere. The Internet Tax Freedom Act, originally passed in 1998 and made permanent in 2016, bars states from taxing internet access itself, whether broadband, mobile data, or any other form. It also blocks discriminatory taxes that would single out online transactions for higher rates than equivalent offline purchases. The products and services you buy through that connection are still fair game.
For digital purchases, the rate is based on where you are, not where the seller is. A streaming service headquartered on the West Coast charges you the rate for your home address wherever that happens to be.
What’s Commonly Exempt
State legislatures have carved out exemptions for items treated as basic necessities. These reduce the burden on lower-income households, since sales tax is regressive: everyone pays the same rate regardless of income.
- Groceries. A majority of states either fully exempt unprepared food or tax it at a reduced rate. The exemption typically covers raw ingredients and packaged goods meant for home cooking. Prepared food from a restaurant, deli counter, or food truck is almost always taxed at the full rate.
- Prescription drugs and medical devices. Medications prescribed by a doctor are exempt in nearly every state with a sales tax. Many states also exempt equipment like wheelchairs, prosthetics, hearing aids, and oxygen devices, though some require a prescription or a separate exemption certificate.
- Clothing. A handful of states exempt everyday clothing below a per-item price cap, most commonly $110. Most states tax clothing the same as any other physical good. Where exemptions exist, they usually cover only basic apparel and exclude accessories, athletic gear, and formal wear.
- Menstrual products and diapers. A growing number of states have eliminated sales tax on period products and baby diapers in recent years. Not every state has followed.
Some states also hold annual sales tax holidays, usually a weekend in late July or August, during which certain items (typically clothing, school supplies, and sometimes computers) are temporarily tax-free below a per-item price cap. About 17 states run one. Your state’s revenue department will have the exact dates and qualifying items.
When the Buyer Changes the Answer
Sometimes the item is taxable but the buyer isn’t paying tax on it, at least not at that step.
The most common example is resale. A retailer purchasing inventory to sell to customers provides the supplier with a resale certificate and skips the sales tax on that purchase. The tax gets collected later, when the customer buys the item at retail. The goal is one tax at the point of final sale to the end consumer, not a tax at every step of the supply chain.
Nonprofit organizations, educational institutions, and government agencies can often purchase goods tax-free for their operations by presenting a valid exemption certificate at the time of purchase. Which purchases qualify, what form is required, and how often the exemption needs renewal all vary by state.
Misusing a resale certificate for personal purchases is treated as tax fraud, not a technicality. Penalties include back taxes, interest, substantial fines, and potential criminal charges.
Online and Remote Purchases
If you remember a time when online shopping meant no sales tax, that era ended in 2018. The Supreme Court’s decision in South Dakota v. Wayfair eliminated the old rule that a seller needed a physical presence in your state before it could be required to collect tax. An “economic presence” was enough. South Dakota’s law, which the Court used as its model, set the bar at $100,000 in annual sales or 200 separate transactions delivered into the state.1Supreme Court of the United States. South Dakota v. Wayfair, Inc., No. 17-494
Most states adopted similar thresholds. Today virtually every state with a sales tax requires remote sellers crossing those lines to register, collect, and remit. In practice, you now pay sales tax on most online purchases regardless of where the seller sits.
Buying through a platform like Amazon, Etsy, or eBay adds a layer. Nearly every sales-tax state has passed marketplace facilitator laws requiring the platform itself to collect and remit on behalf of its third-party sellers.2Streamlined Sales Tax. Marketplace Facilitator State Guidance For shoppers, this is invisible. The tax shows up on the receipt, and the platform handles the rest.
Use Tax: When the Seller Didn’t Charge You
When you buy something and no sales tax is collected (from a private party, at an out-of-state craft fair, from a small foreign retailer), most states expect you to pay the equivalent amount yourself. This is called use tax, and the rate matches your local sales tax rate. It exists to prevent tax avoidance through cross-border shopping.
Most individuals ignore this obligation, and consumer-side enforcement has historically been light. The legal requirement is still real. Some states include a use tax line on their income tax returns to make it easier to report and harder to overlook. For businesses, auditors look specifically for untaxed purchases from out-of-state vendors, and the penalties match those for unpaid sales tax.
How the Rate on Your Receipt Is Built
The rate you pay usually isn’t one tax. It’s a stack: state, county, city, and sometimes special district levies added together. State-level rates in 2026 range from 2.9% to 7.25%, and once local add-ons are factored in, combined rates exceed 11% in some jurisdictions.3Tax Foundation. State and Local Sales Tax Rates, 2026 Two stores ten miles apart can charge meaningfully different rates if they sit in different cities or counties.
Five states impose no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Alaska is the exception within that group. The state doesn’t levy a sales tax, but some local governments within Alaska do, so you can still encounter one there depending on where you shop.
For online and shipped purchases, the rate that applies is based on the delivery address, not the seller’s location. That’s why the tax on an online order can look different from what a nearby store would have charged you in person.