How to Calculate Sales Tax
Sales tax is added on top of the listed price at checkout. Knowing how to calculate it lets you budget accurately and verify charges on your receipts.
The sales tax formula
Sales tax is a percentage of the purchase price collected by the seller and sent to the government. To find the total price including tax, multiply the pre-tax price by (1 + tax rate as a decimal).
Example: A $150 item with 9% sales tax. $150 x 1.09 = $163.50 total. The tax amount is $13.50.
To find just the tax amount without the total: Tax Amount = Pre-Tax Price x (Tax Rate / 100). So $150 x 0.09 = $13.50 tax.
Finding the pre-tax price from a total
If you know the total and want to find what the pre-tax price was, divide the total by (1 + the tax rate as a decimal).
Example: You paid $163.50 and the tax rate is 9%. $163.50 / 1.09 = $150.00 pre-tax price.
This reverse calculation is useful when a receipt shows a total but not the breakdown, or when calculating the taxable amount for expense reporting.
Sales tax by state: a quick reference
The US has no national sales tax. Each state sets its own rate, and cities or counties often add local rates on top. Here are the combined state and average local rates for major states.
| State | State Rate | Avg. Combined Rate |
|---|---|---|
| Oregon | 0% | 0% |
| Montana | 0% | 0% |
| Delaware | 0% | 0% |
| New Hampshire | 0% | 0% |
| California | 7.25% | 9.03% |
| Texas | 6.25% | 8.2% |
| New York | 4% | 8.54% |
| Florida | 6% | 6.98% |
| Illinois | 6.25% | 8.98% |
| Tennessee | 7% | 9.61% |
| Washington | 6.5% | 9.57% |
| Colorado | 2.9% | 7.89% |
| Arizona | 5.6% | 8.54% |
Combined rates include average local taxes and vary within each state by city. To calculate the exact tax on any purchase at any rate, use our Sales Tax Calculator.
What is and is not taxable
Applying your state's rate to every line on a receipt will usually overestimate the tax, because sales tax does not fall on everything uniformly. The exemptions are set state by state, so the only universal advice is to check your own state's rules, but the broad patterns hold across most of the country.
Commonly exempt or reduced: unprepared groceries are fully exempt in roughly two thirds of states. Prescription medication is exempt in most states. Clothing is exempt year round in a small number of states, Pennsylvania and New Jersey being the most prominent.
Commonly taxable even where groceries are not: prepared food, meaning restaurant meals and hot takeout, is generally taxed even in states that exempt groceries. Many of those states also carve candy and soda back out of the grocery exemption, so a cart can carry two different rates at once.
Digital goods and services are the least settled category. Software, streaming subscriptions, and downloads are treated inconsistently between states and the rules are still changing, so a subscription taxed in one state may not be in the next.
If a purchase is large enough that the tax matters, your state's Department of Revenue publishes the authoritative rules and usually a rate lookup by zip code.
Sales tax on online purchases
Online shopping used to be a reliable way to avoid sales tax. That changed with the Supreme Court's 2018 decision in South Dakota v. Wayfair, which allowed states to require tax collection from retailers that have significant economic activity in the state even without a physical presence there.
In practice this means every large retailer now collects sales tax in every state that has one, at the rate for your delivery address rather than the seller's location. Smaller sellers that have not crossed their state's economic threshold may still not collect it.
Where a seller does not collect, most states technically require the buyer to self-report and pay the equivalent use tax. Compliance among individual consumers is close to nonexistent, but the obligation exists, and it applies to businesses far more meaningfully than to shoppers.
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