Sales Tax By State: State And Local Sales Tax Rates for 2023

You’ll pay many types of taxes over your lifetime, but the one you’re probably most familiar with is sales tax. Most states impose this tax when you purchase a product or service, to generate revenue. Sales tax often helps fund essential state and local programs and institutions, like schools and fire departments.

The amount of sales tax you’re required to pay varies by state. Four states don’t charge sales taxes. Other stateshave local sales tax or state sales tax, and many states charge both. Below, we’ll cover what sales tax is and the sales tax rate by state.

What Is A Sales Tax?

A sales tax is levied by a state or local government on the sale of everyday goods and services, like clothing or energy costs. When you purchase a good or service, the sales tax is an extra fee added at checkout.

The goods and services subject to sales tax vary by state. For instance, some states don’t apply sales tax to food purchases. Check with your state government to determine which sales tax rates apply to you.

Retail businesses must track and collect sales tax from shoppers, paying it out to their state government on a recurring basis.

Sales Tax Rate

The sales tax rate is the percentage of the purchase price that’s taxed. State governments set the state sales tax rates, decide whether local governments can collect additional taxes and determine what types of products and services are taxed. Most sales tax rates range between 5% – 7%, though the rate can be as low as 2.9% or as high as 7.25%.

What Is A Local Sales Tax?

Most states allow local governments to set and levy a sales tax. That said, 12 states and the District of Columbia don’t allow local sales taxes, which are taxes that only apply to certain jurisdictions within a state. For example, a county may charge a local sales tax. The dozen states that don’t permit local sales taxes are Connecticut, Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, Oregon and Rhode Island.

Sales Tax Rates By State

Do you know which states have a sales tax or the sales tax rate for your state?

Here’s a table of state sales tax rates, average local sales tax rates and combined tax rates as of July 1, 2023, including the District of Columbia. Delaware, Montana, New Hampshire and Oregon aren’t included in the table because they don’t have state or local sales taxes.

5 States With The Highest Sales Tax

These five states have the highest average state sales tax:

• California (7.25%)
• Indiana (7.00%)
• Mississippi (7.00%)
• Rhode Island (7.00%)
• Tennessee (7.00%)

5 States With The Lowest Sales Tax

Of the states that charge state sales tax, Colorado’s is 2.9%, the lowest state sales tax rate in the U.S. There’s a five-way tie between these states at 4%:

• Alabama
• Georgia
• Hawaii
• New York
• Wyoming

5 States With The Highest Average Combined State And Local Sales Tax Rates

These five states have the highest average combined state and local sales tax:

• Tennessee (9.55%)
• Louisiana (9.55%)
• Arkansas (9.44%)
• Washington (9.40%)
• Alabama (9.24%)

4 States Without Sales Tax

These four states don’t have sales taxes:

• Delaware
• Montana
• New Hampshire
• Oregon

Other Types Of Taxes

You’ll likely pay several other types of taxes throughout your lifetime, including income taxes and excise taxes. Unlike sales tax, you pay income tax on money earned from working, interest earned on bank accounts, royalties and other sources.

An excise tax only applies to certain goods and services, such as tobacco, fuel and gambling. A business or merchant usually pays this tax to the federal government (or state and local governments) and then passes the cost of the tax down to consumers.

Sales Tax Vs. Use Tax

Residents living near state borders where one state has a lower sales tax often prefer to shop in the neighboring state. As a result, it can cause the state with a higher sales tax to miss out on tax revenue.

Some states impose a use tax to discourage this behavior. The use tax allows a state to collect sales taxes from individuals or businesses that purchase taxable goods or services in another state or online without paying sales taxes.

For instance, you may owe use taxes if your state has a use tax and you buy an item from an online retailer or state that doesn’t collect sales taxes. You typically account for this tax when you file your state tax return.

Which items, if any, are subject to use tax and whether use taxes on these items apply to individuals as well as businesses will vary by state. 

The Bottom Line: Sales Taxes Are An Important Component Of Your Overall Tax Burden

Since most states charge a sales tax, you’ll likely pay it when you buy goods or services. If you plan on visiting a state with a low sales tax rate, you probably won’t pay use taxes on inexpensive purchases. However, you’ll likely pay sales tax if you purchase an expensive item, like a vehicle.

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