Understanding sales tax is essential for shoppers and business owners alike across the United States. With tax rates varying significantly from state to state—and even between counties and cities—knowing what to expect at checkout can help you budget more effectively and avoid surprises.
Sales Tax Basics Across America
Unlike many countries that use a nationwide Value Added Tax (VAT), the United States employs a complex system where sales taxes are determined at state and local levels. This creates a patchwork of different rates across the country.
Five states currently have no statewide sales tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
However, even in these states, local municipalities might impose their own sales taxes.
Highest and Lowest Sales Tax States
If you’re planning a major purchase, knowing which states have the highest and lowest combined state and average local sales tax rates could save you money.
States with highest combined rates:
- Tennessee (9.55%)
- Louisiana (9.52%)
- Arkansas (9.48%)
- Washington (9.29%)
- Alabama (9.22%)
States with lowest rates (excluding zero-tax states):
- Hawaii (4.44%)
- Wyoming (5.36%)
- Wisconsin (5.43%)
- Maine (5.50%)
- Virginia (5.75%)
Real-World Examples
Let’s look at how this works in practice:
Example 1: In Tennessee, if you purchase a laptop for $1,000, you would pay approximately $95.50 in sales tax, bringing your total to $1,095.50.
Example 2: For that same $1,000 laptop in Hawaii, you would only pay about $44.40 in sales tax, resulting in a total of $1,044.40—a savings of over $50 compared to Tennessee.
Tax-Free Shopping Days
Many states offer tax holidays—specific days when sales tax is temporarily waived on certain categories of items. These often coincide with back-to-school shopping seasons or disaster preparedness campaigns.
Common tax-free categories include:
- School supplies and clothing
- Energy-efficient appliances
- Hurricane preparedness items
- Firearms and hunting supplies (in some states)
Online Shopping and Sales Tax
Following the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require online retailers to collect sales tax even without a physical presence in the state. Most major online retailers now collect appropriate state and local sales taxes based on the delivery address.
Planning Around Sales Tax
For major purchases, considering sales tax rates can lead to significant savings:
- Research rates before making large purchases
- Consider shopping across state lines if you live near a lower-tax or no-tax state
- Take advantage of tax holidays for eligible purchases
- Remember that certain essential items like groceries and medications are exempt from sales tax in many states
Conclusion
While sales tax might seem like a small percentage, it can add up quickly on large purchases. Using a reliable percentage calculator and staying informed about your local rates will help you make more accurate budgeting decisions and potentially save money when making significant purchases.
Remember that tax rates change periodically, so always verify the current rates in your specific location before making important financial decisions.