Sales taxes in the United States

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A sales tax is a tax on consumption and is normally a certain percentage that is added onto the price of a good or service that is purchased. Sales taxes in the United States are assessed by most states except Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon. In some cases, sales taxes are also assessed at the county or municipal level. While there is no national sales tax in the United States, the most popular tax reform proposal in Congress is the Fair Tax Act, which would replace most federal taxes with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens.

Sales tax is usually the responsibility of the merchant to collect and remand to the state, and stated separately (or implicitly added at the time of sale) to consumers. Usually only consumers are charged the tax; resellers are exempt if they do not make use of the goods. In some jurisdictions, a reseller's certificate is required to make use of this privilege. This is in contrast to a Value Added Tax (VAT), where resellers are also taxed (resellers may then claim the VAT paid on their purchases from the applicable authority). States which have exemptions for specific types of organizations (such as schools), may also require a certificate.

The Constitution of the United States limits the power of the states to subjects within their jurisdiction. Jurisdiction over interstate commerce is reserved to the federal government. Nevertheless, a resident of a state with a sales tax who purchases goods from a place with no sales tax (or at a lower rate) might be subject to pay a "use tax" (often at the same rate as the state sales tax) for non-exempt purchases (see also tax-free shopping).

(Note: Taxes change, are added or removed regularly, so this page is prone to being out of date. If so, please change the page accordingly and cite a source if possible. There are private database companies that distribute updates weekly regarding the rules in 11,000 different tax jurisdictions in the U.S.)

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[edit] Alabama

Alabama's state sales tax is 4%, but cities and counties may impose additional use taxes.

[edit] Alaska

There is no state sales tax in Alaska; however, local governments (boroughs and their municipalities) may levy up to 7%, and 95 of them do so. [1] Municipal sales taxes are collected in addition to borough sales taxes, if any. Regulations and exemptions vary widely across the state. [2] Anchorage and Fairbanks do not charge a local sales tax.

[edit] Arizona

Arizona has a transaction privilege tax (TPT) that differs from a "true" sales tax in that the tax is levied on the gross receipts of the vendor and is not a liability of the consumer.[3] (As explained in Arizona Administrative Code rule R15-5-2202, vendors are permitted to pass the amount of the tax on to the consumer, but remain the liable parties for the tax to the state.) TPT is imposed under seventeen tax classifications (as of November 1, 2006, the number of classifications will be reduced to sixteen[4]), with the tax rate most commonly encountered by Arizona consumers (e.g., for retail transactions) set at 5.6%,[5] though cities and counties add as much as 5% to the total rate.[6] Food for home consumption and prescription drugs (including legend drugs and certain prescribed homeopathic medication) are two of many items of tangible personal property that are statutorily exempt from the retail TPT.

[edit] Arkansas

Arkansas has a state sales tax of 6%, plus any additional local taxes.

[edit] California

California has a statewide sales tax rate of 7.25%, and local supplementary taxes are allowed up to 8.75%.[citation needed] Sales and use taxes in the state of California are collected by the State Board of Equalization. The statewide 7.25% is allocated as:[7]

  • 6.25% - State
    • 5.00% - State - General Fund
    • 0.25% - State - Fiscal Recovery Fund
    • 0.50% - State - Local Revenue Fund
    • 0.50% - State - Local Public Safety Fund
  • 1.00% - Uniform Local Tax
    • 0.25% - Local County - Transportation funds
    • 0.75% - Local City/County - Operational funds

Supplementary sales tax may be added (with voter approval) in increments of 0.125%[citation needed] by cities, counties, service authorities, and various special districts (such as the Bay Area Rapid Transit district). The effect is that sales tax rates vary from 7.25% (in areas where no additional taxes are charged) to 8.75% (in the city of Avalon, on Santa Catalina Island, and in Alameda County, in the Bay Area).

The last changes to the published local tax rates took effect on July 1, 2006. Official updates are published on the Board of Equalization website and also in Publication 71.

Vehicle purchases are taxed based on the city and county in which the purchaser registers the vehicle, and not on the county in which the vehicle is purchased. This negates the (perceived) advantage of purchasing a car in a "cheaper" county in order to save on sales tax (a 1% difference in sales tax rates on a $30,000 car would otherwise result in a $300 savings).

Excluded are food (except where sold hot or suitable for consumption on the premises), animals, plants, fertilizer, drugs, certain medical supplies, utilities, certain alternative energy devices and supplies, art for display by public agencies, and veterans pins. There are many specific exemptions for various veterans, non-profit, educational, religious, and youth organizations. Sale of items to certain out-of-state or national entities (mostly transportation companies) is exempt, as are some good sold while in transit through California to a foreign destination.

There are also exemptions for a large number of specific products, from telephone lines and poles, to liquid petroleum gas for farm machinery, to coins, to public transit vehicles. There are partial exemptions for such varied items as racehorse breeding stock, teleproduction service equipment, and timber harvesting equipment. [8] For an organized list of exemptions, with estimates for how much revenue the state loses for each, see Publication 61 of the Board of Equalization.

Motor vehicle gasoline and jet fuel are subject to special taxation regimes. In 2005, there was a political dispute in the San Francisco Bay Area about whether revenues for jet fuel should be credited to San Mateo County (where San Francisco International Airport is physically located), the City and County of San Francisco, which owns the airport, or Alameda County, where Oakland International Airport is located. (The distinction is largely point of delivery vs. point of negotiation for the sale.) This is controlled by Regulation 1802, which has other provisions about businesses which have multiple locations.

Critics of the current sales tax regime charge that it gives local governments an incentive to promote commercial development (through zoning and other regulations) over residential development.[9]

[edit] Colorado

Colorado's state sales tax is 2.9% with some cities and counties levying additional taxes. Denver's tangibles tax is 3.5%, with food eaten away from the home being taxed at 4%. There is also a football stadium tax and mass transit tax. Most transactions in Denver and the surrounding area are taxed at a total of 7.6%. Colorado does not charge sales on unprepared food (groceries), but it does tax clothing.

[edit] Connecticut

Connecticut has a 6% sales tax, with no additional local taxes. Clothing (per item up to $50) is exempt. Various items, including certain food products, internet service, nonprescription drugs, medicines, and smoking cessation products are exempt from sales tax [10][11].

[edit] District of Columbia

There is no sales tax imposed on the capital district by the U.S. Congress; however, there is a Washington city sales tax of 5.75%, as it has most of the responsibility for the district. The rate is 9% for alcohol consumed off-premises, 10% for restaurant and take-out meals, rental cars and calling cards, 12% for commercial parking, and the 14.5% lodging tax for hotels and motels. Groceries and all medicines are exempt, as are residential public utility services. [12]

There is also a sales tax holiday occasionally, usually occurring in September in order to benefit back-to-school shoppers.

[edit] Delaware

There is no sales tax in Delaware.

[edit] Florida

Florida has a statewide sales tax of 6%. The tax is imposed on the sale or rental of goods, the sale of admissions, the lease, license, or rental of real property, the lease or rental of transient living accommodations, and the sale of a limited number of services such as commercial pest control, commercial cleaning, and certain protection services. There are a variety of exemptions from the tax, including groceries and prescriptions. [13] A "discretionary sales surtax" may be imposed by the counties of up to 1.5%, charged at the rate of the destination county (if shipped). This is 1% in most counties, 0.5% in many, 1.5% in very few, and 0.25% in one county. A few have none at all. Most have an expiration date, a few do not. Only the first $5,000 of goods are subject to any surtax. [14]

There are annual sales tax holidays, such as a back-to-school holiday on clothing, books, and school supplies under a certain price, as well as a new one in June to promote hurricane preparedness.

[edit] Georgia

Georgia has a 4% state sales tax rate. Food is exempt from the state sales tax rate, but subject to tax by the local sales tax rate. Counties may impose local sales tax of 1% to 3%, consisting of up to three 1% local option sales taxes (out of a set of five) as permitted by Georgia law. Also, the city of Atlanta imposes an additional 1% Municipal Option Sales Tax. As of July 2006, sales tax rates in Georgia vary from 6% to 7%, except for the City of Atlanta at 8%.

[edit] Hawaii

Hawaii does not technically have a sales tax, but it does have an excise tax which applies to nearly every conceivable type of transaction (including services), and is technically charged to the business rather than the consumer. Unlike other states, businesses may or may not show the tax separately on the receipt, as it is technically part of the selling price. 4% (sometimes shown as a 4.166% tax) is charged at retail and 0.5% is charged on wholesale. The exact dollar or percentage amount to be added must be quoted to customers within or along with the price. [15] The use of an excise tax means that tax-exempt non-profit organizations must pay the tax, unlike states where they are exempt from sales taxes.

[edit] Idaho

Idaho has a 6% state sales tax.

[edit] Illinois

Illinois has a 6.25% state sales tax. Grocery and non-prescription drugs have sales tax of 1%. In Chicago, the general sales tax is 9.0%, in many suburbs adjacent to Chicago, the tax is 9%. Taxes are levied at the municipal and county level as well as the state level. Taxes also vary by merchandise: Chicago has a 12% tax on soft drinks, and in Morton Grove, a 10% tax on fast food. Taxes vary significantly by municipality. Illinois' system is exceptionally complicated, and is detailed in this publication.

[edit] Indiana

Indiana has a 6% state sales tax. The most common untaxed items sold at retail are medications and some foods.

[edit] Iowa

Iowa has a 5% state sales tax. Some cities, and the unincorporated areas of some counties, impose local option sales taxes of up to 1% each, bringing the total to as much as 7%. The Iowa Department of Revenue provides information about local option sales taxes, including sales tax rate lookup.

[edit] Kansas

Kansas has a 5.3% state sales tax.

[edit] Kentucky

Kentucky has a 6% state sales tax. Most staple grocery foods are exempt.

[edit] Louisiana

Louisiana has a 4% state sales tax. There are also taxes on the parish level (parishes are what other states call counties) and some on the city levels. Louisiana also bids out sales tax audits to private companies, with many being paid on a percentage collected basis.

[edit] Maine

Maine has a 5% general, service provider and use tax. The tax on lodging and prepared food is 7% and short term auto rental is 10%. These are all generally known as "sales tax".

[edit] Maryland

Maryland has a 5% state sales and use tax with exceptions for medicine, residential energy, and most non-prepared foods.

[edit] Massachusetts

Massachusetts has a 5% sales tax, replete with numerous exceptions including (among other things): "food products" (but excluding prepared meals); residential water, gas, electric services; returnable containers, clothing and footwear up to $175; prescription medicines, prostheses and medical appliances or services; publications for use in education or religious worship; poultry and livestock, as well as their feed; fruit and vegetable stock for generating food for humans; tools, machinery, parts, etc., for use in agriculture; cloth or other materials used for making for clothing; residential heat pump, solar or wind power system; items purchasable with federal food stamps; etc. A recently enacted change (2006) now taxes computer software that is downloaded for use in Massachusetts, whereas previously this was viewed as a non-taxed "service". MGL 64H s.6.

[edit] Michigan

Michigan has a 6% sales tax. Food and prescription drugs are not taxed.

[edit] Minnesota

Minnesota has a 6.5% state sales tax. Food and Clothing are exempt from this tax. Municipalities may be allowed by the State Legislature to institute local option taxes. An additional 0.5% is imposed in St. Paul and Minneapolis, bringing the total sales tax to 7%. As of Jan. 1 2007 an additional 0.15% will be imposed by Hennepin County to finance the new Minnesota Twins stadium.

[edit] Mississippi

Mississippi has a 7% state sales tax. Cities and towns may implement an additional tourism tax on restaurant and hotel sales. The city of Tupelo has a 0.25% tax in addition to other taxes.

[edit] Missouri

Missouri has a 4.225% sales tax rate. Cities and counties may impose additional use taxes. Food has a sales tax rate of 1.225%.

[edit] Montana

Montana does not have a state sales tax but some municipalities which are big tourist destinations have a small sales tax such as Whitefish, Red Lodge, Big Sky, and West Yellowstone.

[edit] Nebraska

Nebraska has a 5.5% state sales tax. Municipalites have the option of imposing an additional sales tax of up to 1.5%. Specific tax rates per counties are available and here.

[edit] Nevada

Nevada's state sales tax is 6.5%. Sales tax in the Las Vegas area is 7.75% as of October 1, 2005. The added 0.25% will fund new police officers.

[edit] New Hampshire

New Hampshire is one of only five states that does not impose any form of general sales tax upon the sale or use of tangible personal property within the state. New Hampshire does, however, levy a tax on meals, room occupancies, motor vehicle rentals, cigarettes, beer, wine, gasoline, and use of electricity (55 cents per megawatt-hour) and phone services (7 percent). A transfer tax is levied on real estate sales; currently 0.15 percent.

In New Hampshire any food or beverage that is prepared and served by a "restaurant", whether served for consumption on or off the restaurant premises, is considered to be a meal. Excluded from the tax is any food and beverage that is wholly packaged off the premises and sold in the original package, such as chips, candy, soda or fruit beverages in sealed containers and frozen novelties. Catered or delivered meals or party platters are taxable, as are charges for any service or items related to preparing or serving the food (plates, ovens, etc). Restaurants include most places where you can buy any food. There are several other exceptions. For example, meals served or furnished on the premises of a religious or charitable nonprofit organization are not taxable, nor are bakery products sold in quantity of 6 or more servings, or a whole pie, cake, or loaf of bread with multiple servings.

The New Hampshire meals and rooms tax rate is 8% on any amount more than 35 cents (including any alcohol). The rooms tax is imposed on any occupancy in a hotel, house, apartment, dormitory, camp, cottage or any similar establishment offering sleeping accommodations in the State of New Hampshire, for any rental less than 185 days, not including bare campsites without shelter. The tax rate is currently 8% of the rent for each occupancy. A motor vehicle rental tax is imposed under the meals and room tax classification at a rate of 8% on the gross rental receipts of each rental, but not including separately itemized fuel, insurance or damage charges.

Gasoline tax is 20.6 cents per gallon. Cigarettes: 80 cents per pack. Beer: 30 cents per gallon.

See also tax-free shopping.

[edit] New Jersey

New Jersey has a 7% state sales tax. This is split as 3.5% for the State, and 3.5% for the municipality. Several municipalities, such as Elizabeth, Jersey City, and Mount Holly do not collect the city portion of the sales tax (as an incentive to lure shoppers), resulting in an effective 3.5% sales tax rate.

Also, in an effort to spur commercial and residential growth, Salem County and Cumberland County are the only counties in the state in which all areas institute the 3.5% sales tax rate throughout. Note also that these counties are the closest in the state to Delaware, which does not collect sales tax.

New Jersey does not charge sales tax on food or clothing.

To end the July 2006 New Jersey government shutdown, an agreement was made to increase sales tax from 6% to 7%. Half of the 1% increase is to go towards property tax relief, while the other half is to alleviate the state budget deficit. The new tax rate began on July 15, 2006.

Since July 15, 2006, all sales of clothing and accessories that are made of fur from the hide or pelt of an animal are subject to the Fur Clothing Gross Receipts Tax. This includes clothing and accessories not entirely made of fur where the fur is the component of chief value (e.g. a cloth coat with a mink collar and cuffs where the value of the mink exceeds the value of the cloth material). This tax is imposed at the rate of 6%.

Effective October 1, 2006, vendors will be required to charge sales tax on the following: space for storage; tanning services; massage services; tattooing; investigation and security services; information services; limousine services; membership fees; parking (excluding residential parking, employee parking [when provided by an employer or at a facility owned and operated by the employer, municipal metered parking, and municipal parking taxes); magazines and periodicals (with exclusions); digital property; prewritten computer software delivered electronically; laundering/dry cleaning/tailoring/pressing; installing floor covering; landscaping servcies; delivery charges for taxable goods and services. These changes in New Jersey law were outlined in an August 2006 notice by Jon S. Corzine (governor) and Bradley I. Abelow (state treasurer) and were sent to all New Jersey vendors.

[edit] New Mexico

New Mexico does not technically have a sales tax, but it has a 5% statewide gross receipts tax which is applied on typically everything including sales of goods and services, but not sales of food for offsite consumption.

The state does not prohibit retailers from collecting this tax directly from the consumer, so the gross receipts tax is commonly just passed on from the retailer to the consumer as if it were a sales tax.

Cities and counties add additional gross recept taxes on top of the state rate, for a combined rate that is typically between 6% and 8%.

[edit] New York

New York has a 4% state sales tax. All counties and some cities add local taxes ranging from 3% to 5.5%. The combined sales tax in Utica, New York, for example, is 9.5%. In New York City, total sales tax is 8.375%, which includes 0.375% charged for the benefit of the Metropolitan Transportation Authority (New York). As of 4/1/06, New York State has again eliminated sales tax on all clothing and shoes up to $110.00 per item. Most counties and cities have not eliminated their local sales taxes on clothing and shoes. However, 11 counties and 5 cities (most notably New York City) have eliminated their sales taxes on clothing and shoes under $110. The counties where the year-round exemption will apply include: Chautauqua, Chenango, Columbia, Delaware, Dutchess, Greene, Hamilton, Madison (outside the City of Oneida), Rensselaer, Tioga and Wayne. The cities where the year-round exemption will apply include: Gloversville, New York City, Norwich, Olean, and Sherrill.

[edit] North Carolina

North Carolina has a state-levied sales tax of 4.25%. Sales are also subject to county taxes. Most counties tax 2.5%, for a total tax of around 7%. Mecklenburg County has a higher rate at 3%. In addition, there is a 29.9¢ tax per gallon of gas, a 30¢ tax per pack of cigarettes, a 79¢ tax on wine, and a 48¢ tax on beer. There are also additional taxes levied against food and prepared foods, normally totalling 2% and 8% respectively.

[edit] North Dakota

North Dakota has a 5% state sales tax.

[edit] Ohio

Ohio has a 5.5% state sales tax. Counties may levy a permissive sales tax of from 1/4% up to 2% and transit authorities, mass transit districts usually centered on one primary county, may levy a sales tax of from 1/4% up to 2%. Tax increments may not be less than 1/4%, and the total tax rate, including the state rate, may not exceed 8.5%. County permissive taxes may be levied by emergency resolution of the county boards of commissioners. Transit authority taxes must and county permissive taxes may be levied by a vote of the electors of the district or county.

[edit] Oklahoma

Oklahoma has a 4.5% sales tax rate. City and county sales tax rates range from 0% to 5%. [16]

[edit] Oregon

Oregon has no statewide sales tax, although local municipalities may impose sales taxes if they so choose. The city of Ashland, for example, charges a 5% sales tax on prepared food; as of 2006, this is the only voter-approved sales tax in the state of Oregon.

[edit] Pennsylvania

Pennsylvania has a 6% sales tax rate. Allegheny County and Philadelphia County have total sales tax rates of 7%. Food (not-ready-to-eat), most clothing, medication, and prescription drugs are among the items exempt. [17]

[edit] Puerto Rico

Puerto Rico has a 5.5% sales tax. Municipalities have the option of imposing an additional sales tax of up to 1.5%.

[edit] Rhode Island

Rhode Island has a state sales tax of 7%. The rate was raised to from 1% to 6% as a temporary measure in the 1970s, but has not since been lowered.

Rhode Island raised its sales tax from 6% to 7% in the early 1990s to pay for the bailout of the state's failed credit unions. The change was initially proposed as a temporary measure, but was later made permanent.

Local taxes may also apply, such as Cranston's 1% restaurant tax.

Many items are exempt from the state sales tax, eg. food, prescription drugs, clothing and footwear, newspapers, coffins, and original artwork. [18]

[edit] South Carolina

South Carolina has a 5% state sales tax (7% for accommodations), but counties may impose an additional 1% or 2% sales tax. As of mid-2005, 35 of 46 counties do so. There is a cap of $300 on sales tax for most vehicles.

[edit] South Dakota

South Dakota has a 4% state sales tax, plus any additional local taxes.

[edit] Tennessee

Tennessee charges 6% sales tax on groceries, and 7% on other items. Counties also tax up to 2.75% in increments of 0.25%—most do so around 2.25%. If a county does not charge the maximum, its cities can charge and keep all or part of the remainder. Several cities are in more than one county, but none charge a city tax, thus paying only the county taxes.[19] [20]

[edit] Texas

The Texas state sales and use tax rate is 6.25%, but local taxing jurisdictions (cities, counties, special purpose districts, and transit authorities) may also impose sales and use taxes up to 2% for a total of 8.25%.[21] Medicine, produce, eggs, meats, bakery products, and others are exempt from tax.[1]

[edit] Utah

Utah has a 4.75% state sales tax. Additionally, local taxing authorities can impose their own sales tax. Currently the majority of Utah's aggregate sales taxes are in the range of 5.5% - 7.0%. (Utah Sales and Use Tax Rates)

[edit] Vermont

Vermont has a 6% state sales tax. Purchases of clothing and footwear under $110 per items are not taxed. The towns of Williston, Manchester, and Stratton add a 1% local option sales tax. Burlington will also add a 1% local option tax in the fall of 2006. (VT Dept of Taxes).

[edit] Virginia

Virginia has a 5% state sales tax. Eligible food items are taxed 1.5%. VA Dept of Taxation Cities and counties may also charge an additional "Food and Beverage Tax" on restaurant meals. Code of Virginia § 58.1-3842

[edit] Washington

Washington has a 6.5% state sales tax. The sales tax does not apply to food items (carbonated beverages are not classified as food). Local additional sales taxes vary from 0.5% to 2.4%, sales taxes for the regional transit authority (for example, total sales tax in Seattle is 8.8%, and 9.3% in restaurants and coffee shops).

Residents of Oregon, Alaska, Montana and Alberta are exempt from sales tax on purchases of tangible personal property for use outside the state. [22].

[edit] West Virginia

West Virginia has a 6% state sales tax. Effective January 1, 2006, the sales tax on food was lowered to 5%, except prepared meals and food sold with a fork, which remains taxed at 6%. Prescription drugs are not subject to sales tax. Motor vehicles are not subject to the state's sales tax, but a separate "privilege tax" of 5% is assessed on all vehicles sold in the state.[citation needed]

[edit] Wisconsin

Wisconsin has a 5% state sales tax.

Most of the 72 counties in the state charge an extra .5% "County Tax."

Five counties (Milwaukee, Ozaukee, Racine, Washington, Waukesha) have a .1% tax that funds the building of Miller Park in Milwaukee.

Brown County (Green Bay) has a .5% tax for the reconstruction of Lambeau Field

Prescriptions, most non-prepared food, (non-prepared) meat and dairy are exempt. (Wisconsin Sales and Use Tax Treatment)

[edit] Wyoming

Wyoming has a 4% state sales tax.

[edit] See also

[edit] References

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