How Sales Tax Works in the United States
Sales tax is a consumption tax collected by retailers at the point of sale and remitted to state and local governments. Unlike VAT (value-added tax) used in most other countries, US sales tax is added on top of the listed price — so a $100 item plus 8% tax costs $108 at checkout.
Tax-Exclusive vs. Tax-Inclusive Pricing
Tax-exclusive (standard in the US): The listed price does not include tax. Tax is calculated on top of the displayed amount. Formula: total = price × (1 + rate / 100).
Tax-inclusive (common in Europe): The listed price already includes tax. To find the pre-tax amount, divide by (1 + rate / 100). Use the "Remove Tax" mode above for this calculation.
Why Rates Vary by State — and Within States
The US has no federal sales tax. Each state sets its own base rate, and counties and cities can add local taxes on top. Louisiana and Tennessee consistently rank among the highest combined rates (around 9.5%), while five states — Oregon, Montana, New Hampshire, Delaware, and Alaska — have no statewide sales tax at all. Alaska allows local taxes, so some Alaskan cities do collect sales tax.
What Is Typically Exempt from Sales Tax?
Exemptions vary widely by state but commonly include unprepared groceries, prescription drugs, and medical equipment. Some states exempt clothing below a price threshold, and many offer periodic "tax holidays" on school supplies or energy-efficient appliances. Always verify your state's rules for the specific category of goods you are buying.