Sales taxes in the United States are taxes placed on the sale or lease of goods and services in the United States. Sales tax is governed at the state level, and no national general sales tax exists. Forty-five states, the District of Columbia, the territories of Puerto Rico, and Guam impose general sales taxes that apply to the sale or lease of most goods and some services. States also may levy selective sales taxes on the sale or lease of particular goods or services. States may grant local governments the authority to impose additional general or selective sales taxes.
, five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Louisiana ranks as the state with the highest sales tax. Residents in some areas face a 12% sales tax.Louisiana residents are paying the highest sales tax rate in the United States in 2024, Greg Hilburn, Shreveport Times.
Laws vary widely regarding which goods are subject to tax. For instance, some U.S. states such as Tennessee, Idaho, or Mississippi tax groceries, feminine hygiene products and diapers. Others, such as Minnesota and Massachusetts, do not tax these items.
Sales tax is calculated by multiplying the purchase price by the applicable tax rate. The seller collects it at the time of the sale. Use tax is self-assessed by a buyer who has not paid sales tax on a taxable purchase. Unlike the value added tax, a sales tax is imposed only at the retail level. In cases where items are sold at retail more than once, such as used cars, the sales tax can be charged on the same item indefinitely.
Sales taxes, including those imposed by local governments, are generally administered at the state level. States imposing sales tax either impose the tax on retail sellers, such as with Transaction Privilege Tax in Arizona, or impose it on retail buyers and require sellers to collect it.
In either case, the seller files returns and remits the tax to the state. In states where the tax is on the seller, it is customary for the seller to demand reimbursement from the buyer. Procedural rules vary widely. Sellers generally must collect tax from in-state purchasers unless the purchaser provides an exemption certificate. Most states allow or require electronic remittance.
Taxable items
Sales taxes are imposed only on taxable transfers of goods or services. The tax is computed as the tax rate times the taxable transaction value. Rates vary by state and by locality within a state.See, e.g., Wyoming Vendor Manual, Revenue.state.wy.us, page 4. Not all types of transfers are taxable. The tax may be imposed on sales to consumers and to businesses.Hellerstein, Jerome R., and Hellerstein, Walter, State and Local Taxation: Cases and Materials, 2005, , page 690 (hereafter "Hellerstein" with a page number); Hellerstein, Jerome R., and Hellerstein, Walter, State Taxation, currently available as a subscription service, 2010, 12.01 (hereafter "Hellerstein" with a section number).
Taxable sales Transfers of tangible personal property for cash or a promise to pay cash (sales) are often subject to sales tax, subject to exceptions.For tables of information on state taxes, see, e.g., 2009 State Tax Handbook, CCH, , or later editions, or All States Handbook, 2010 Edition, RIA Thomson, or later editions, or Hellerstein, 12.02. Also see, e.g. New York Sales and Use Tax, which states, New York "Tax Law exempts purchases for resale; most sales to or by the federal and New York State governments, charitable organizations, and certain other exempt organizations; sales of most food for home consumption; and sales of prescription and nonprescription medicines." Sales tax does not apply to transfers of real property, though some states impose a real estate transfer or documentary tax on such transfers. All states provide some exemptions from sales tax for wholesale sales, that is, sales for resale.Hellerstein, page 691; Hellerstein, 14.01. However, some states tax sales for resale through vending machines.See, e.g., Louisiana Publication 20165, quoting Louisiana R.S. 47:301(10) as providing that sales tax is due when the operator of a vending machine purchases the goods, not when they are resold through vending machines.
Purchases of gift cards are not subject to sales tax in all states. These purchases are considered to be similar to the exchange of cash. The sales tax will be charged when gift cards are used as payment for taxable goods or services. There was a proposal in New York State to impose a sales tax when a gift card is purchased instead of imposing it when the card is used, but it failed.
Most states also exempt bulk sales, such as sales of an entire business. Most states exempt goods purchased for use as ingredients or parts in further manufacturing from sales tax. Buyers in exempt sales must follow certain procedures or face tax.
Sales to businesses and to consumers are generally taxed the same, except as noted in the preceding paragraph. Businesses receive no offset to sales tax collection and payment obligations for their own purchases. This differs significantly from value-added taxes.
The place and manner of sale may affect whether a sale of particular goods is taxable. Many states tax food for consumption on premises but not food sold for off-premises consumption.Sales of food in restaurants are generally taxable, while sales in grocery stores often are not. For example, Texas Publication 96-280, "Grocery and Convenience Stores: Taxable and Nontaxable Sales", differentiates sales of individual-sized packages of many foods. It states, "If your store has a dining area, collect sales tax on individual-sized packages of such items as chips … If your store doesn't have eating facilities, do not collect sales tax on chips …" Many other states have such distinctions, but details vary widely. The use to which goods are put may also affect whether the sale is subject to tax. Goods used as ingredients in manufacturing may be exempt from tax, whereas the same goods used as supplies may not be.
Rentals Many states tax the rental of tangible personal property. Often, the tax is not dependent on the use to which the property will be put. The State of Florida and its counties charge a use tax on the rental of commercial real estate. Cities and counties in Arizona may charge their own use tax on commercial leases, but not all do.
Exempt organizations Many states exempt charitable, religious, and certain other organizations from sales or use taxes on goods purchased for the organization's use.Hellerstein 13.10. Generally, such an exemption does not apply to a trade or business conducted by the organization.Texas and California courts have rejected exemptions for sales by religious organizations of their publications on the grounds that such an exemption constituted a prohibited establishment of religion.
Use tax States that impose sales taxes also impose a similar tax on buyers of taxable property or services when sales tax is not paid. Use taxes are functionally equivalent to sales taxes. The sales and use taxes, taken together, "provide a uniform tax upon either the sale or the use of all tangible personal property irrespective of where it may be purchased."Tennessee Supreme Court, Broadacre Dairies, Inc. v. Evans, 246 S.W.2d 78 (1952). Some states permit offset of sales taxes paid in other states on the purchased goods against use tax in the taxpayer's state.Wyoming Vendor Manual, page 5.
Taxable value The amount subject to sales tax is generally the net sales price. Such price is generally after any applicable discounts;See, e.g., Texas Publication 96-280 for reduction of sales price of groceries for coupons. however, in some states, the rules vary depending on whether a discount coupon is provided by a seller or by a manufacturer.
Some states exempt a portion of the sales or purchase price from tax for some classes of goods.See, e.g., Louisiana partial exemption for tangible personal property that is not an ingredient but is consumed in a manufacturing process (such as conveyor belts or motor oils), in Louisiana Publication R-1002 .
Taxable goods
No state imposes sales tax on all types of goods. State laws vary widely regarding which goods are subject to tax. Food for preparation and consumption in the home is often not taxable, nor are prescription medications. By contrast, restaurant meals are often taxed.States that tax only some food must distinguish between taxable and nontaxable goods, a distinction that is often difficult to make. Distinctions between foods that may be consumed on-premises and those that may be consumed off-premises, such as prepackaged foods sold in convenience stores, may be particularly difficult. See Hellerstein, 13.09. The Ohio Constitution provides in Article XII, Section 3 that "no excise tax shall be levied or collected upon the sale or purchase of food for human consumption off the premises where sold." This has led to Ohio Supreme Court cases that differentiate between sales at mall food courts (taxable) and sales at stadiums (exempt).
Many states provide exemptions for certain types of goods but not for others. Certain types of foods may be exempt, and certain types taxable, even when sold in a grocery store for home consumption.See, e.g., New York Publication 880 for an incomplete list of taxable and exempt foods and beverages. Lists of what goods are taxable and what are not may be voluminous.For example, in defining the term "baked goods," certain of which are exempt from sales tax, the Texas Administrative Code Section 3.293(a) states, "(1) Bakery items--Baked goods typically made by bakeries including bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, Danishes, cakes, tortes, pies, tarts, muffins, bars such as lemon bars, cookies, large pretzels, and tortillas. The term does not include candy; snack items including chips, small pretzels, or crackers; sandwiches; tacos; or pizzas." All items purchased using the Supplemental Nutrition Assistance Program are exempt from sales tax due to federal law.
Services Most states tax some services, while others tax many. However, taxation of services is the exception rather than the rule.Hellerstein, page 701. Few states tax the services of a doctor, dentist, or attorney. Services performed in connection with the sale of tangible personal property are often subject to tax. Most states, however, tax services that are integral to producing goods, such as printing or cabinetmaking.See, e.g., examples in New York sales tax regulation 527.4.
Telecommunications services are subject to a tax similar to a sales tax in most states. Only a few states tax internet access or other information services. States rarely tax construction services. Materials used in the construction of real property may be subject to sales tax to the builder, the subcontractor, or the person engaging the builder, or may be wholly exempt from sales tax.
Intangible property