Questions about sales tax? You’re in the right place. We cover the basics here.
What is sales tax?
Consumers pay sales tax on top of, and at a certain percentage of, the sales price of the taxable goods and services they buy.
Sales tax basics
Tangible personal property (TPP) — items that can be moved, touched, or felt — is generally subject to sales tax in the United States, unless excluded by law or by a valid reseller or exemption certificate. Services, such as hairstyling or lawn care, are sometimes taxable, depending on the state and the service.
45 states, the District of Columbia, and Puerto Rico impose some form of general sales tax. Alaska, Delaware, Montana, New Hampshire, and Oregon do not. They do, however, often allow local taxes on specific services, such as telecommunications and lodging. There is no federal or national sales tax in the U.S.
It varies — widely. There are 12,000+ sales tax jurisdictions in the U.S., encompassing states, counties, cities, and other localities and special districts. Each jurisdiction has the ability to impact sales tax rates and regulations, to varying degrees. And those rates and regulations change frequently.
Get sales tax rates by state
First, know how to source the sale. Most states use destination-based sourcing, which means the applicable sales tax rates and rules are the ones tied to the delivery address. However, some states use origin-based sourcing (i.e., the location of the seller or shipper). Others use a hybrid approach.
Next, use the exact address of the sourcing location, not just the ZIP code. Multiple sales tax jurisdictions can be located within a single ZIP code. Even next-door neighbors could pay different sales tax rates if their homes are located within different sales tax jurisdictions.
Then, calculate sales tax by starting with the statewide rate, if applicable. Add any county, city, local, and/or special district taxes on top to get the total combined rate that applies to a taxable transaction. Remember, certain buyers and products are exempt, according to sales tax laws.
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