How to Calculate Sales Tax: Formula, Examples and Rates by State

Sales tax is calculated by multiplying a price by the sales tax rate and adding the result to the price. On a $50.00 purchase at an 8% rate, the tax is $50.00 × 0.08 = $4.00, and the total is $54.00. That's the whole formula, and most of the time it's all you need. The difficulties come from everything around it: finding the correct rate for an address, working backward from a receipt total, knowing which items are taxed, and handling trade-ins, coupons, shipping and online orders.

This guide covers each of those. Rates in the examples are the 50 states plus Washington, D.C., as of July 2026, using the average combined state and local rate for each state. Your exact rate depends on your address, since cities, counties and special districts add their own taxes on top of the state rate. Our sales tax calculator handles all three calculations covered here: adding tax, removing it from a total, and finding the rate from a price and a total.

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The sales tax formula

Sales tax = price × (rate ÷ 100). Total = price + sales tax. Or in one step: total = price × (1 + rate ÷ 100). At a 7.25% rate, the one-step multiplier is 1.0725, so a $240 purchase costs 240 × 1.0725 = $257.40, of which $17.40 is tax.

Converting the rate to a decimal is where errors creep in. 7.25% is 0.0725, not 0.725; 6% is 0.06; 10.25% is 0.1025. A quick check: the tax should be a small fraction of the price, usually under a tenth. If the tax is larger than the price or close to it, the decimal point is in the wrong place.

When a receipt has several items, the tax is normally calculated on the taxable subtotal, not item by item, and then rounded to the nearest cent. Some states require item-by-item rounding, which can make the total a cent or two different from a single calculation on the subtotal. For budgeting, the difference doesn't matter. For a business reconciling sales, follow your state's rounding rule.

Step by step: adding sales tax to a price

Step 1: find the combined rate for the address where you take possession of the item. For in-store purchases, that's the store's address. For deliveries, it's usually your delivery address. Step 2: convert the rate to a decimal by dividing by 100. Step 3: multiply the taxable price by the decimal. Step 4: round to the nearest cent and add it to the price.

Example: a $129.99 pair of headphones in Seattle, where the combined rate is 10.35%. The decimal is 0.1035. 129.99 × 0.1035 = $13.45 after rounding. The total is $143.44. The same headphones in Portland, Oregon, cost $129.99 because Oregon has no sales tax. In Austin, Texas, at 8.25%, the tax is $10.72 and the total is $140.71.

State and local rates: what you actually pay

Forty-five states and Washington, D.C. have a statewide sales tax. Alaska, Delaware, Montana, New Hampshire, Oregon have no state rate, although Alaska allows local sales taxes. In 38 states, cities, counties or special districts add local taxes on top. The rate on your receipt is the combined total of all of them.

That's why the state rate on its own is misleading. Colorado's state rate is only 2.9%, the lowest of any state with a sales tax, but local add-ons bring the average combined rate to 7.89%. Alabama's state rate is 4%, yet its average combined rate is 9.46% because local rates average more than the state rate. The five highest average combined rates in mid-2026 are Louisiana (10.13%), Tennessee (9.61%), Washington (9.57%), Arkansas (9.48%), Alabama (9.46%).

The table shows the combined average rate and the tax on three purchase sizes in ten states. For an exact rate at a specific address, use the state's own rate lookup tool or our state sales tax pages, which list the state rate, average local rate and maximum local rate for every state.

See sales tax rates for all 50 states →

Step by step: removing sales tax from a total

Working backward from a receipt is the calculation people most often get wrong. To find the pre-tax price, divide the total by (1 + rate). Do not multiply the total by (1 − rate). The tax was calculated on the pre-tax price, not on the total, so taking the rate off the total removes too much.

Example: a receipt for $108.88 in New York City at 8.875%. The correct pre-tax price is 108.88 ÷ 1.08875 = $100.00, and the tax was $8.88. Multiplying 108.88 × (1 − 0.08875) gives $99.22, which is 78 cents too low. The error grows with the total and the rate: on a $1,000 total at 10%, the wrong method understates the price by $9.09.

Reverse calculation matters for expense reports that need the pre-tax amount, for sellers who want a product to land on a round total including tax, and for comparing prices between a store that quotes tax-inclusive prices and one that doesn't. The table shows several examples, comparing the correct method with the common mistake.

Take the tax out of $108.88 →

Finding the rate from a receipt

If you have the pre-tax price and the total but don't know the rate, divide the tax by the pre-tax price and multiply by 100. A $64.00 purchase that came to $69.52 had $5.52 of tax: 5.52 ÷ 64 = 0.08625, or 8.625%. That's how you check whether a store charged the right rate, or work out the local rate in a place you're visiting.

Because receipts are rounded to the cent, small purchases can only pin the rate down to about one decimal place. On a $4.00 purchase, any rate from about 8.63% to 8.87% produces the same 35 cents of tax. Use a larger purchase, or several items together, for a more precise answer. Our sales tax calculator has a 'find the rate' mode: enter the price before tax and the total paid, and it returns the rate.

Find the rate from a $64 receipt →

What's taxable and what isn't

Sales tax applies to most physical goods, which the law calls tangible personal property. What's exempt varies by state. Groceries are exempt or taxed at a reduced rate in most states. In 2026, Illinois ended its 1% state grocery tax and Arkansas removed its small remaining state grocery tax, though local grocery taxes can still apply in both. Prescription drugs are exempt almost everywhere. Clothing is exempt in a handful of states, including Minnesota, New Jersey and Pennsylvania, and below a price threshold in others; New York exempts clothing and footwear under $110 from the state portion of the tax.

Services are where states differ most. Many states don't tax most personal services such as haircuts, legal advice or repairs, while Hawaii, New Mexico, South Dakota and a few others tax a broad range of services. Digital products, such as streaming subscriptions, e-books and software downloads, are taxed in some states and not in others. Restaurant meals are taxed almost everywhere, sometimes at a higher rate than general merchandise.

Sales tax on cars

Vehicle purchases follow special rules in most states. The tax is usually collected when you register the car, not at the dealership counter, and it's often based on the address where the car will be registered, not where you bought it. Some states use a vehicle-specific rate or a separate motor vehicle excise tax instead of the general sales tax rate.

The biggest variable is the trade-in. Most states tax only the difference between the price and the trade-in value. A handful, including California, tax the full purchase price regardless of the trade-in. The difference can be large. On a $32,000 car with a $12,000 trade-in at Missouri's average combined rate of 8.44%, taxing only the $20,000 difference gives about $1,688.00 of tax; taxing the full price would give $2,700.80. Manufacturer rebates are taxable in some states (tax is charged on the price before the rebate) and not in others. Dealer documentation fees are taxable in many states. Check your state's department of revenue or motor vehicle agency for the exact rules before you budget for a car purchase.

Estimate sales tax on a car after a trade-in →

Discounts, coupons and shipping

Store discounts and store coupons reduce the taxable price in nearly every state. If a store takes $20 off a $100 item, you pay tax on $80. Manufacturer coupons are different: the store is reimbursed by the manufacturer, so many states tax the price before the manufacturer coupon. Buy-one-get-one offers are usually taxed on the amount you actually pay.

Shipping and delivery charges are taxable in some states and exempt in others, and the rules often depend on whether shipping is listed separately on the invoice and whether the item itself is taxable. In many states, separately stated shipping on a taxable item is taxable; in others it's exempt. Handling fees are more often taxable than pure shipping charges.

Online purchases and use tax

Since the Supreme Court's 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax once their sales into the state pass an economic threshold, commonly $100,000 a year. Large marketplaces such as Amazon, Walmart and eBay collect tax on behalf of their third-party sellers in every state with a sales tax. In practice, most online purchases now include sales tax at checkout, calculated at the rate for your delivery address.

When a seller doesn't collect, because it's a small business below the threshold, the buyer technically owes use tax at the same rate. Use tax is reported on the state income tax return in most states, and few individuals pay it on small purchases. It's enforced more consistently on large items such as cars, boats and equipment, and on businesses. Our guide to online sales tax explains the collection rules in more detail.

Sales tax holidays

About 15 states hold sales tax holidays each year, temporarily exempting items such as school supplies, clothing, computers, hurricane-preparedness supplies or energy-efficient appliances. Most are in late July and August for back-to-school shopping. Each holiday has its own list of eligible items and price caps per item, often $100 for clothing and $1,000 to $1,500 for a computer. During a holiday, the tax on a qualifying item is simply zero; items over the cap are usually taxed on the full price, not just the amount over the cap.

How much sales tax you pay in a year

Because sales tax is collected a few dollars at a time, it's easy to underestimate. A household that spends $25,000 a year on taxable goods pays about $2,257 of sales tax at California's average combined rate, $2,050 in Texas, $1,745 in Florida and nothing in Oregon. Groceries, rent, utilities in most states, insurance and most services aren't taxed, so taxable spending is usually well under half of a household's total spending. A single large purchase changes the picture: a $40,000 car adds thousands of dollars of tax in one year.

That's why sales tax matters when comparing states. Washington and Texas have no income tax but above-average sales taxes, while Oregon has no sales tax but one of the higher income taxes. For most households, income tax differences are larger than sales tax differences, but for retirees and others who spend a large share of their income, sales tax carries more weight.

If you itemize deductions on your federal return, you can deduct either state and local income tax or state and local sales tax, not both. The sales tax option is usually better in states with no income tax. You can use the IRS's optional sales tax tables, which estimate the deduction from income and family size, and add the actual tax on major purchases such as a car or boat. The combined deduction for state and local taxes is capped at about $40,000 a year from 2025 through 2029, with a lower cap for incomes over $500,000.

If you're a seller: collecting and remitting

Businesses that sell taxable goods register with each state where they have nexus, collect tax at the rate for each sale's location, and file returns monthly, quarterly or annually depending on volume. The rate is set by the buyer's location for most shipped goods, which means a seller shipping nationwide may deal with thousands of local rate combinations. Most use software that looks up the rate by address at checkout.

Pricing a product to land on a round tax-included total uses the reverse formula. If you want a festival ticket to cost $25.00 including 8.25% tax, the pre-tax price is 25 ÷ 1.0825 = $23.0947. Prices have to be whole cents, though, and here no price lands exactly on $25.00: $23.09 plus $1.90 of tax is $24.99, and $23.10 plus $1.91 is $25.01. That's why venues often advertise tax-included prices and absorb the odd cent. Always check the final total after rounding.

Calculate it in one step

The sales tax calculator has three modes: add tax to a price, take tax out of a total, and find the rate from a price and a total. State pages list each state's base rate, average local rate and highest local rate as of July 2026, with a calculator pre-set to that state.

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