Sales tax — the invisible extra at every till

The United States has no national sales tax or VAT (value-added tax). Instead, each state and city adds sales tax at the register — rates and rules vary dramatically depending on where you are, and a handful of states don't charge any sales tax at all.

How much sales tax will you pay?

The US has over 12,000 distinct sales tax jurisdictions. Most people encounter sales tax as a layer of state tax plus one or more local taxes (county, city, or district). When you shop, the store adds the combined rate at checkout.

Combined state and local rates typically run between 5 and 10 percent. Louisiana has the highest combined rate at about 10.11 percent. Tennessee, Arkansas, Washington, and Alabama also top the list with rates above 9 percent. These high rates exist partly because those states have lower or no income tax.

To understand your actual cost, you need the full address — not just the state. A customer buying the same item in different cities within Texas, Illinois, or Colorado will pay different totals because local rates stack on top of the state rate. Chicago's combined rate, for example, is 10.25 percent, while Springfield's is 8.75 percent — both in Illinois, which has a state rate of 6.25 percent.

Five states have no sales tax

Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a statewide sales tax. However, Alaska is the only one where local governments are allowed to add their own sales tax — rates in Alaskan communities reach up to 7.5 percent. Delaware, Montana, New Hampshire, and Oregon are completely tax-free on retail goods.

Many people cross state lines or move specifically to avoid sales tax, especially for major purchases like vehicles or appliances. Because neighboring states want to stay competitive — New Jersey, for example, directly adjacent to Delaware, has a 6.625 percent statewide rate — some have created special tax zones or incentives to keep local shoppers.

What is exempted — and what always gets taxed

Sales tax rules depend heavily on the item and the state. Some purchases are protected from tax, while others are almost always taxed, and a few fall in a gray zone that varies by state.

Groceries

Most states exempt unprepared groceries — bread, milk, eggs, fresh produce, canned goods, and meat. This is the most common exemption because food is seen as a necessity. As of 2026, only eight states still tax groceries: Alabama, Hawaii, Idaho, Mississippi, Missouri, South Dakota, Tennessee, and Utah. Many states offer reduced rates or tax credits instead of a full exemption. Arkansas and Illinois only recently eliminated their grocery taxes at the start of 2026.

However, the exemption almost never covers prepared food. Restaurant meals, deli items sold ready to eat, and food served with utensils are taxable in virtually every state. Some states are very strict about the definition — a hot chicken sandwich is taxable, but the same chicken purchased cold may not be.

Prescription and over-the-counter medicines

Prescription drugs are exempt from sales tax in all 45 states that have a sales tax — no exceptions. This consistency exists because prescriptions are considered essential medical care. Illinois is the only state that taxes prescriptions, and it does so at a reduced rate of 1 percent.

Over-the-counter medicines are more complicated. Many states exempt them, but others tax them at the full rate. States like Connecticut, Maryland, Minnesota, New Jersey, New York, Pennsylvania, Texas, Vermont, and Virginia exempt OTC drugs, while California, Colorado, Georgia, Indiana, Kansas, and Ohio tax them. Some states allow a doctor's prescription to convert an OTC product into a tax-exempt purchase.

Clothing and personal care

Most states tax clothing at the full rate, but a few offer partial or full exemptions. New York exempts clothing items under 110 dollars per piece, Massachusetts exempts items under 175 dollars, and Rhode Island exempts items under 250 dollars. Minnesota, New Jersey, Pennsylvania, and Vermont offer full exemptions for most clothing. Cosmetics, shampoo, toothpaste, and other personal care items are taxable in nearly every state.

Shopping online — the delivery address rule

If you try to avoid sales tax by ordering online from a no-sales-tax state, you will not succeed. Since a 2018 US Supreme Court decision in South Dakota v. Wayfair, online sellers are required to collect sales tax based on where the item is shipped, not where the seller is located. The tax applies to your delivery address.

When you place an online order, the retailer calculates tax using your shipping address, not your billing address. If you live in a high-tax state and order from a seller in a no-tax state, you still owe the sales tax for your state and city. Large platforms like Amazon, Etsy, and Shopify automatically handle this calculation for you through marketplace facilitator laws that exist in nearly every state.

State rules vary — check your state

Exemptions and rates change frequently. Some states are still adapting their tax codes to the digital economy — what counts as a digital good (e-books, apps, music, cloud software) is now being taxed differently state by state. A few states have introduced small exemptions for essentials like diapers and menstrual products.

Because sales tax is set by each state and modified regularly, always check your state's Department of Revenue website for the most current rules before making major purchases. The IRS also maintains state and local sales tax resources for tax filing purposes.