What’s The Sales Tax?

Sales tax is a consumption tax paid to the government on the sale of certain goods and services. In general, the seller receives sales tax from the consumer. When the consumer purchases. In most countries, sales tax is called value-added tax (VAT) or goods and services tax (GST), which is a different form of consumption tax. In some countries, the prices of goods and services are pre-tax, and sales tax is levied at the time of purchase. While in other countries, prices are after-tax, which includes sales tax.

Sales Tax in the United States

In the United States, there is no federal sales tax. At the state level, of all the states (including the District of Columbia, Puerto Rico, and Guam), there are five states that do not have a statewide sales tax. These states are Alaska, Delaware, Montana, New Hampshire, and Oregon. States that impose sales taxes have different rates, and even local or city sales taxes may apply within states. Unlike value-added tax (VAT), sales tax only applies to retail purchases; most transactions of goods or services between businesses do not incur sales tax.

The sales tax rate can range from 0% to 16%, depending on the state and the type of goods or services. All states are different in the implementation of sales tax. For example, in Texas, prescription drugs and food seeds are tax-exempt. The general sales tax in Vermont is 6%, but an additional 10% tax is levied on instant-food alcoholic beverages.

U.S. State Sales Tax Rates

State	General State Sales Tax	Max Tax Rate (Including Local/City Tax)
Alabama	4%	13.50%
Alaska	0%	7%
Arizona	5.60%	10.725%
Arkansas	6.50%	11.625%
California	7.25%	10.50%
Colorado	2.90%	10%
Connecticut	6.35%	6.35%
Delaware	0%	0%
District of Columbia	6%	6%
Florida	6%	7.50%
Georgia	4%	8%
Guam	4%	4%
Hawaii	4.166%	4.712%
Idaho	6%	8.50%
Illinois	6.25%	10.25%
Indiana	7%	7%
Iowa	6%	7%
Kansas	6.50%	11.60%
Kentucky	6%	6%
Louisiana	4.45%	11.45%
Maine	5.50%	5.50%
Maryland	6%	6%
Massachusetts	6.25%	6.25%
Michigan	6%	6%
Minnesota	6.875%	7.875%
Mississippi	7%	7.25%
Missouri	4.225%	10.85%
Montana	0%	0%
Nebraska	5.50%	7.50%
Nevada	6.85%	8.375%
New Hampshire	0%	0%
New Jersey	6.625%	12.625%
New Mexico	5.125%	8.688%
New York	4%	8.875%
North Carolina	4.75%	7.50%
North Dakota	5%	8%
Ohio	5.75%	8%
Oklahoma	4.50%	11%
Oregon	0%	0%
Pennsylvania	6%	8%
Puerto Rico	10.50%	11.50%
Rhode Island	7%	7%
South Carolina	6%	9%
South Dakota	4%	6%
Tennessee	7%	9.75%
Texas	6.25%	8.25%
Utah	6.10%	8.35%
Vermont	6%	7%
Virginia	5.30%	7%
Washington	6.50%	10.60%
West Virginia	6%	7%
Wisconsin	5%	6.90%
Wyoming	4%	6%

The Importance Of The Sales Tax

Sales tax is about 2% of U.S. income. It is an important source of revenue for state governments and is second only to income tax. The importance of the sales tax in the southern and western states is greater than in New England and the industrial middle states.

How To Reduce The Sales Tax?

When filing federal income taxes, taxpayers must choose between the standard deduction or the itemized deduction. Sales tax can only be used as a deduction in this case When itemized deduction is selected. Most Americans choose the standard deduction, but if you’ve made large purchases throughout the year, using the sales tax as a deduction can be beneficial.

FAQs Sales Tax

What Is Sales Tax?

Sales tax is a consumption tax paid to the government on the sale of goods and services.

Is There A Sales Tax In All States?

No, Alaska, Delaware, Montana, New Hampshire, and Oregon do not have a statewide sales tax.

What Is The Rate Of Sales Tax?

The sales tax rate can range from 0% to 16%, depending on the state and type of goods.

Can Sales Tax Be Used As A Deduction?

Yes, if you choose the itemized deduction, sales tax can be used as a deduction.

References

Wikipedia: Information about sales tax and VAT.

Tax Foundation: The Rates and Importance of Sales Tax.

IRS: Tax deduction rules