Calculate sales tax amounts and total prices. Find pre-tax prices from totals and compare tax rates by state.
Sales tax is a consumption tax imposed by governments on the sale of goods and services. It's calculated as a percentage of the purchase price and collected by the seller at the point of sale, then remitted to the government. The tax rate varies by location, with different rates at state, county, and city levels that can combine to create the total sales tax rate.
The basic formula is: Tax Amount = Price × (Tax Rate / 100) and Total Price = Price + Tax Amount. For reverse calculations to find the pre-tax price: Pre-tax Price = Total Price / (1 + Tax Rate / 100).
Sales tax rates vary significantly across the United States. Some states have no sales tax, while others combine state, county, and local taxes for rates exceeding 10%. Here are the current state-level rates:
| State | State Rate | Avg Combined Rate | Max Combined Rate |
|---|---|---|---|
| California | 7.25% | 8.85% | 10.75% |
| Texas | 6.25% | 8.20% | 8.25% |
| Florida | 6.00% | 7.08% | 7.50% |
| New York | 4.00% | 8.52% | 8.875% |
| Illinois | 6.25% | 8.83% | 11.00% |
| Pennsylvania | 6.00% | 6.34% | 8.00% |
| Washington | 6.50% | 9.38% | 10.60% |
| Tennessee | 7.00% | 9.55% | 9.75% |
| Louisiana | 4.45% | 9.56% | 11.45% |
| Arizona | 5.60% | 8.40% | 11.20% |
| Alaska | 0.00% | 1.76% | 7.50% |
| Delaware | 0.00% | 0.00% | 0.00% |
| Montana | 0.00% | 0.00% | 0.00% |
| New Hampshire | 0.00% | 0.00% | 0.00% |
| Oregon | 0.00% | 0.00% | 0.00% |
Note: Five states (highlighted in green) have no statewide sales tax. Alaska allows local sales taxes. Combined rates include state, county, and local taxes.
The base tax rate set by the state government, applied uniformly across the entire state. This is the minimum sales tax rate you'll pay anywhere in that state.
Example: California state rate is 7.25%
Additional taxes imposed by counties, cities, or special districts. These stack on top of the state rate and can vary significantly even within the same state.
Example: Los Angeles adds 2.25% to CA's 7.25% = 9.50% total
Tax on items purchased out-of-state or online where sales tax wasn't collected. Consumers are technically required to self-report and pay use tax, though compliance is low.
Example: Buying from out-of-state seller without tax collection
Additional taxes on specific products like gasoline, alcohol, tobacco, and luxury items. These are often included in the displayed price rather than added at checkout.
Example: Federal excise tax on gasoline is 18.4¢ per gallon
Many states exempt certain items from sales tax to reduce the tax burden on necessities. Common exemptions include:
Nexus Determination
Businesses must collect sales tax in states where they have "nexus" - a significant presence. This includes physical locations, employees, inventory, or meeting economic thresholds (typically $100,000 in sales or 200 transactions). Post-Wayfair ruling, online sellers must track nexus in all states where they sell.
Registration and Permits
Register for a sales tax permit in each state where you have nexus. This is usually free but required before collecting tax. You'll receive a sales tax ID number and must display your permit at physical locations. Failure to register can result in penalties and back taxes.
Collection and Remittance
Collect the correct tax rate based on the buyer's location (destination-based) or your location (origin-based), depending on state rules. File returns monthly, quarterly, or annually based on your sales volume. Remit collected taxes by the due date to avoid penalties and interest charges.
Record Keeping
Maintain detailed records of all sales, tax collected, exemption certificates, and returns for at least 3-7 years (varies by state). Use accounting software to track sales by location and automatically calculate tax. Keep exemption certificates on file for tax-exempt sales to prove compliance during audits.
Marketplace Facilitator Laws
If you sell through platforms like Amazon, eBay, or Etsy, the marketplace may collect and remit sales tax on your behalf in states with marketplace facilitator laws. However, you're still responsible for direct sales and sales in states without these laws. Verify what the platform handles and what you must handle yourself.
Tax rate is based on the seller's location. Simpler for businesses with physical stores but can be complex for online sellers.
States using origin-based:
Arizona, California, Illinois, Mississippi, Missouri, New Mexico, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia
Tax rate is based on the buyer's location. More complex for sellers but ensures buyers pay their local rate.
Most states use destination-based
This is the standard for most states and all remote/online sales. Sellers must determine the buyer's location and apply the correct combined rate.
You buy a laptop for $1,200 in Los Angeles, CA (9.5% combined tax rate):
Result: Pay $1,314 total | Tax paid: $114
Your receipt shows a total of $856 including 7% sales tax. What was the pre-tax price?
Result: Pre-tax price was $800 | Tax paid: $56
You order $500 worth of items online from a Texas seller, shipping to New York (8.875% NYC rate):
Result: Pay $544.38 total | Tax based on buyer location
Comparing the same $2,000 purchase in Oregon (0% tax) vs Washington (10% combined rate):
Result: Save $200 (10%) by purchasing in a tax-free state for large items
| Pre-Tax Price | 5% Tax | 7% Tax | 9% Tax | 10% Tax |
|---|---|---|---|---|
| $50 | $52.50 | $53.50 | $54.50 | $55.00 |
| $100 | $105.00 | $107.00 | $109.00 | $110.00 |
| $250 | $262.50 | $267.50 | $272.50 | $275.00 |
| $500 | $525.00 | $535.00 | $545.00 | $550.00 |
| $1,000 | $1,050.00 | $1,070.00 | $1,090.00 | $1,100.00 |
| $5,000 | $5,250.00 | $5,350.00 | $5,450.00 | $5,500.00 |
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