Updated July 2, 2026
U.S. sales tax is unusually complicated because rates are set at multiple levels and vary by precise location. This guide explains how it works. It is informational, not tax advice.
How rates stack up
A sales tax rate is almost always a combination: a state rate plus county, city, and sometimes special-district rates. That is why two addresses in the same state can produce different totals, and why rate lookups require at least a ZIP code. The Sales Tax Calculator returns the estimated combined rate. The Sales Tax by State page shows state-level base rates.
Origin vs destination sourcing
States decide whether tax is based on where the seller is (origin sourcing) or where the buyer is (destination sourcing). Most are destination-based: online sellers charge the buyer's local rate. A handful use origin-based rules for in-state transactions. The distinction determines which rate applies to any given order.
Nexus: when you must collect
A business must collect sales tax in any state where it has nexus: a physical presence, or, since the 2018 Wayfair decision, enough economic activity (typically $100,000 in sales or 200 transactions in the state). Economic nexus is how small online sellers end up with obligations in states they have never set foot in.
What's taxable
Taxability varies widely by state. Many states exempt groceries and prescription drugs. Some exempt clothing. Services are treated inconsistently, and digital goods remain unsettled law in several states. For any specific product, check the state's rules directly. The same item can be taxable in one state and exempt in another.
Staying compliant
For shoppers, the posted price plus your local combined rate is what you pay. For sellers: track where you have nexus, apply the correct destination rate, and file on each state's schedule. Rates change regularly, so look them up rather than going by memory.
All calculators on this site
- Sales Tax Calculator - Estimate tax from a ZIP code and purchase amount.
- Sales Tax by State - Average combined sales tax rate for any state.
FAQs
Why do sales-tax rates differ within a state?
Local county, city, and special-district rates stack on top of the state rate. Two addresses in the same city can carry different rates if one falls within a special tax district.
What is destination-based tax?
Tax based on the buyer's location. Most states use it for online and remote sales.
What is economic nexus?
An obligation to collect sales tax after reaching enough sales activity in a state, typically $100,000 in sales or 200 transactions per year, established by the 2018 Wayfair decision.
Are groceries taxed?
Many states exempt groceries and prescription drugs, but definitions vary. Some states tax prepared food while exempting raw ingredients.
Is this tax advice?
No. This is general information for estimates. Verify current rules with your state tax authority before filing.