A discretionary sales tax is a local sales tax that a county or city adds on top of the statewide sales tax rate. “Discretionary sales surtax” is Florida’s official term for it, but nearly every state with a sales tax allows some version of the same thing under names like “local option sales tax” or “county sales tax.” Thirty-eight states currently permit local governments to impose their own sales taxes, and the local add-on can push the total rate you pay at the register well above the state’s base rate.
Why It’s Called Discretionary
The word signals that the tax is optional at the local level. A state legislature authorizes counties or cities to impose it, but each local government decides independently whether to do so and at what rate. Two neighboring counties in the same state can have different local rates, or one might have no local tax at all, because each jurisdiction made its own choice.
In most states, voters must approve the tax through a referendum before it takes effect. The ballot measure spells out the proposed rate, how long the tax will last, and what the money will fund. Some jurisdictions can adopt local sales taxes through a vote of the county commission or city council without going to the ballot. The rules depend on the state’s enabling legislation.
How the Rate Is Set
Every state that allows local sales taxes sets a ceiling on how high those rates can go. A county or city can pick any rate up to that maximum but cannot exceed it. The caps vary dramatically. Some states limit local additions to 1 or 2 percent; others allow local rates above 7 percent.
The process typically works like this: a county commission or city council proposes a rate and defines how the revenue will be spent. If voter approval is required, the measure goes on the ballot at the next election. Once approved, the local government notifies the state’s department of revenue, which handles collection. Businesses then charge both the state rate and the local rate as a single combined tax at the register.
What You Actually Pay
The rate printed on your receipt is almost always the combined state-plus-local figure, so many shoppers don’t realize part of their sales tax is a local add-on. As of January 2026, average combined state and local rates range from about 5.6 percent to just over 10 percent depending on where you shop. The highest average combined rates in the country exceed 9.5 percent, while states that ban local sales taxes stay at whatever the state charges alone.
Rates are not uniform even within a single state. A purchase in a downtown district with overlapping city and county taxes can carry a noticeably higher rate than a purchase just outside the city line in unincorporated territory.
What Gets Taxed
Local sales taxes generally piggyback on whatever the state already taxes. If an item is subject to the state sales tax, the local tax applies too. If an item is exempt from state tax, it is usually exempt from the local tax as well. Groceries, prescription drugs, and other categories a state exempts from its own sales tax typically escape the local surcharge.
The tax covers tangible goods like furniture, electronics, and clothing (in states that tax clothing), along with many services and short-term lodging such as hotel stays. The specifics vary by state because each state defines its own tax base differently.
Which Local Rate Applies to Shipped Goods
When you buy something in one county and have it shipped to another, which county’s local rate applies? The answer depends on whether your state uses destination-based or origin-based sourcing. Roughly three-quarters of states use destination-based rules, meaning the local rate is determined by where the item is delivered or where the buyer takes possession. About a dozen states use origin-based sourcing, which ties the rate to where the seller is located.
The distinction matters most for online and phone orders. If you live in a county with a 1.5 percent local tax and order from a retailer in a county with no local tax, a destination-based state would charge you 1.5 percent. An origin-based state would charge you nothing at the local level for that same order.
Caps on Big-Ticket Purchases
Several states limit how much of an expensive purchase is subject to local sales tax. The idea is to keep local taxes from piling up unreasonably on items like vehicles, boats, and aircraft. In Florida, the local surtax applies only to the first $5,000 of any single item of tangible personal property. Buy a $40,000 car there and you pay the state rate on the full price but the local surtax only on $5,000.
Other states handle this differently. Some cap the dollar amount of local tax per transaction rather than capping the taxable base. Others limit the cap to specific categories like motor vehicles or watercraft while leaving other purchases fully taxable at the local level. A few states impose no cap at all. Before a large purchase, check your state’s rules. It can save you a meaningful amount of money.
Online Purchases
Before 2018, many online retailers had no obligation to collect local sales tax from out-of-state customers. That changed with the U.S. Supreme Court’s decision in South Dakota v. Wayfair, which overturned the old rule requiring a physical presence in a state before that state could demand tax collection. The Court upheld a threshold of $100,000 in annual sales or 200 separate transactions into a state as sufficient to create a collection obligation.1Supreme Court of the United States. South Dakota v. Wayfair, Inc.
Most states have since adopted economic nexus thresholds similar to those numbers, though the details vary. Once a remote seller crosses the threshold, it must collect both state and local sales taxes for every jurisdiction it ships into. For the buyer, local sales tax now shows up on online purchases far more often than it did a decade ago.
If you buy through platforms like Amazon, eBay, or Etsy, the marketplace itself is generally responsible for collecting and remitting all applicable sales taxes, including local portions. Nearly every state with a sales tax has enacted marketplace facilitator laws shifting the collection duty from individual third-party sellers to the platform. The platform decides which rate to charge based on your delivery address.
When Nobody Collects the Tax: Use Tax
When a purchase escapes sales tax at checkout, the buyer still owes what’s called a use tax. This happens most often when you buy from an out-of-state seller that didn’t collect your local tax, or when you buy in a lower-tax jurisdiction and bring the item home. The use tax rate matches your home jurisdiction’s combined state and local rate, and you are legally obligated to report and pay it. Most states include a use tax line on their income tax returns for this purpose.
Enforcement has historically been spotty for individual consumers. States tend to focus audit resources on businesses, where the dollar amounts are larger. The legal obligation exists regardless, and a few states have gotten more aggressive about matching purchase records to tax returns.
Sales Tax Holidays
Many states hold annual sales tax holidays, typically tied to back-to-school shopping or disaster preparedness. Whether the local portion of the tax is also waived depends on the state. Some states suspend both the state and local tax on qualifying items. Others waive only the state portion, leaving the local tax in place. In at least one state, local governments must individually opt in to the holiday by passing an ordinance well in advance. If you are counting on a tax holiday to save money on a large purchase, confirm whether your local tax is included.
Where the Money Goes
Local sales tax revenue funds a wide range of community needs, but many jurisdictions restrict spending to specific categories defined in the enabling legislation or ballot language. Common earmarks include road construction and maintenance, public school facilities, public transit systems, emergency services, and park development. When voters approve the tax through a referendum, the ballot typically describes which projects the money will support. Courts have recognized that revenue raised for one stated purpose cannot legally be redirected to an unrelated use.
Some jurisdictions deposit local tax revenue into a general fund with no spending restrictions, giving the county or city council full discretion over allocation. The structure depends on what the state’s authorizing statute requires and what local voters approved. This is worth paying attention to if a surtax referendum appears on your ballot, because the spending restrictions (or lack of them) determine whether the money goes to something concrete like a new highway interchange or simply backfills the county’s operating budget.
If You Sell Rather Than Buy
Collecting local sales tax is not optional once your business has nexus in a jurisdiction. Most states require you to register for a sales tax permit before you begin making sales. Registration is typically free or costs a nominal fee, and the application asks for basic business information like your federal employer identification number and business type.
States assign a filing frequency based on sales volume, with most new businesses starting on a monthly schedule. Penalties for missing a deadline are steep relative to other tax obligations because states view the money as already belonging to the government: you collected it from customers on the state’s behalf. Late-filing penalties commonly start at 5 to 10 percent of the tax due for the first month and increase from there, often capping around 25 to 30 percent, with interest accruing on top. Willfully keeping collected sales tax crosses from civil penalty territory into criminal liability in most states.