Sales tax rates range from 0% in five states to over 12% in parts of Arkansas. Here's a look at state, local, and combined sales tax rates by state, including how each ranks in terms of highest taxes.
In the United States, 45 states plus Washington, D.C. charge sales tax. Only Alaska, Delaware, Montana, New Hampshire, and Oregon don’t have statewide sales tax.
In states that do have sales tax, rates vary dramatically, from a combined state and local tax rate as high as 12.625% in Arkansas to as low as 4.5% in Hawaii.
The table below shows sales tax rates across the U.S.
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Indiana, Mississippi, Rhode Island, and Tennessee tie for the highest state sales tax rate at 7%.
Some areas also have local sales taxes. Arkansas has the highest possible combined sales tax rate in the town of Gillham, Arkansas, at 12.625%.
The table below shows the states with the highest combined rates.
This table demonstrates the impact of local tax rules. Both Colorado and Alabama have relatively low statewide rates. However, costly local taxes mean some areas in Colorado and Alabama have some of the country's highest combined rates.
Local sales tax rates often apply only in specific cities, counties, or special districts. They do not apply statewide.
For example, buyers in York, Alabama, pay a combined 12% rate: 4% state + 4% Sumter County + 4% city. Customers pay that 12% only on purchases in York, not in other parts of Alabama, where the combined rate can be as low as 4%.
In total, 25 U.S. locations have rates of 6% or higher. Four states are tied for the highest state sales tax rate. These rates apply statewide.
Here are 10 states with the highest statewide rates.
Remember, high statewide rates don't always mean high combined rates. For example, Indiana and Rhode Island charge no local sales tax, so the maximum any buyer pays is 7%. As a result, Rhode Island and Indiana rank 32nd for the maximum combined rate.
By contrast, Tennessee areas charge local rates ranging from 1.5% to 2.75%, so the state ranks 13th for the maximum combined rate.
California also doesn't make the list of states with the highest statewide rates, despite a combined minimum rate of 7.25%. That's because the mandatory statewide rate is only 6%. High local taxes across the state are why customers pay so much in sales tax.
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In the U.S., five states charge no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Among states that charge sales tax, Nevada has the lowest state-only rate at 2%, while Hawaii has the lowest combined rate at 4.5%.
The table below shows the lowest state rates among states that charge sales tax.
And this table shows the lowest combined rates, ranked by the highest combined rate a buyer can pay. Indiana, Iowa, Rhode Island, Vermont, Virginia, West Virginia, and Wyoming are tied at 7.00%.
Hawaii shoppers pay the least sales tax (4.5% max statewide) because the statewide rate is 4% and local rates top out at 0.5%.
However, Hawaii doesn't have a traditional sales tax. It charges a General Excise Tax (GET). The GET taxes businesses' gross receipts, not buyers, and applies to nearly all business activity, including services and rents. So, a low rate doesn't mean a light tax.
Because companies usually pass this cost on to consumers, it is often treated like a sales tax and appears on customer receipts.
It’s also worth noting that a low state rate doesn't necessarily mean a low combined rate. While Nevada's statewide rate is just 2%, mandatory local taxes mean the minimum combined rate any customer pays anywhere in Nevada is 6.85%.
Colorado also has a very low statewide rate of 2.9%, but local rates go as high as 9.1%, making the highest combined rate 12%. This is tied for the second-highest in the country.
Similarly, Alaska charges no state sales tax, but local rates go as high as 7.85%, giving it the 30th-highest combined rate.
Because local taxes are often very high, you can't look only at statewide taxes when determining if a state is tax-friendly.
Five U.S. states don’t charge a statewide sales tax. These include Alaska, Delaware, Montana, New Hampshire, and Oregon.
The absence of a statewide sales tax does not mean customers pay no sales tax. In all five states, taxes are charged on certain purchases or levied on merchants in other ways.
Remote sellers may be obligated to charge these taxes on relevant sales. In Alaska, for example, the Alaska Remote Sellers Sales Tax Commission coordinates local sales tax collection for remote sellers and marketplace facilitators.
Sellers that are based in states that do not charge sales tax are also expected to comply with sales tax rules in other jurisdictions. They must understand rules for physical and economic nexus in any location where they have a physical presence or local customers.
Once a remote seller establishes nexus in another state, they must register, file, and remit according to local requirements.
The United States has no federal sales tax. States and localities set all sales tax rules. Specifically:
In certain states, individual localities can establish and operate their own sales tax systems without input from the state legislature. For example, in Colorado, home rule authorizes localities to set their own tax rules, and in Louisiana, parishes set theirs.
Alabama also lets local governments and independent tax boards administer their own tax system, though the state has a unified tax base. And Alaska lets localities set their own sales tax rates despite having no statewide tax.
Sellers, including remote sellers, must ensure they comply with both statewide and local rules.
Local and state rates can also change throughout the year, although many states allow these changes to take effect only at the start of a calendar quarter. For example, under the Texas state tax administration rules, if a city or county votes to implement a local sales tax change:
Frequent changes to state tax rules complicate compliance for merchants, especially those that must follow sales tax rules in multiple jurisdictions. For example, here are some recent state and local changes:
Sales tax rates vary because state and local governments can levy their own sales tax. This local freedom creates significant complexities for merchants.
For example, a seller in Colorado may be required to collect sales tax ranging from 2.9% to 12% depending on the buyer's location. Sellers must understand all of the taxes that apply within the taxing jurisdiction of each customer. This could potentially include:
The sum of these four rates is the applicable rate. Unfortunately, sellers must charge the correct tax for each address. As of 2020, the U.S. has more than 11,000 standard sales tax jurisdictions, and their boundaries don't follow ZIP codes.
This means a seller selling to two buyers in the same ZIP code may have to charge different sales tax rates. For example, in the 80111 ZIP code in Greenwood Village, portions of the ZIP code fall within Greenwood Village boundaries and are subject to city taxes that don't apply to unincorporated areas of the county.
Sellers can identify the exact rate that applies by using state lookup tools such as the Washington Department of Revenue, the California Department of Tax and Fee Administration, or the Texas Comptroller.
Of course, looking up rates for each individual sale isn't practical.
Many merchants use tax calculation software that automatically calculates the correct tax in real time on every order based on location and item. For example, Numeral's tax engine calculates rates at the rooftop level using coordinate-level precision, rather than relying on ZIP codes.
There is a simple formula used to calculate sales tax on a sale:
Sales Price x Combined Rate = Sales Tax Owed
Here is how this works in practice:
You must know which address to use to determine the correct rate. There are two different approaches to determining which address to apply:
Some states, like California, apply a hybrid rule. You can refer to Numeral’s guide to origin-based vs. destination-based sourcing to determine which rules apply.
State rules also differ on whether tax is charged on shipping, so you will need to understand local requirements.
Understanding the applicable sales tax rate is just one part of your obligations as a merchant. To determine the correct rate to charge, you also must know:
Rules differ across jurisdictions regarding when products are subject to sales tax and which items are taxed at the full rate versus a different rate. For example:
You also must know whether you have nexus in a particular state to determine if you are required to collect. You can establish:
Before 2018, sellers had to collect sales tax only in locations where they had a physical presence. South Dakota v. Wayfair changed this rule, opening the door to economic nexus. This added significant complexity for multi-state sellers who may now need to understand sales tax rules and rates across dozens of jurisdictions.
Numeral can manage all of this for you, from calculating the correct tax to tracking nexus and registering you in new states as required. Get started or book a demo to learn about our end-to-end support for all your sales tax compliance needs.
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