Adding and removing sales tax
Adding tax is straightforward: multiply the price by the tax rate and add the result. A $100 item at 7.25% carries $7.25 of tax for a $107.25 total.
Removing tax is where mistakes happen. You cannot simply subtract 7.25% from the total, because the tax was calculated on the smaller pre-tax figure. Divide instead: $107.25 ÷ 1.0725 = $100.00. Subtracting 7.25% from $107.25 would give $99.47, which is wrong by 53 cents — an error that compounds across a set of expense reports or invoices.
| Price before tax | Tax | Total |
|---|---|---|
| $25.00 | $1.81 | $26.81 |
| $49.99 | $3.62 | $53.61 |
| $120.00 | $8.70 | $128.70 |
| $1,000.00 | $72.50 | $1,072.50 |
Why removing tax is a division
The table shows the right answer beside the common wrong one. Subtracting the rate from a tax-inclusive total always understates the pre-tax price, and the error grows with the amount.
| Total paid | Price before tax (÷ 1.0725) | Tax | Wrong: total less 7.25% | Error |
|---|---|---|---|---|
| $107.25 | $100.00 | $7.25 | $99.47 | $0.53 |
| $53.61 | $49.99 | $3.62 | $49.72 | $0.26 |
| $500.00 | $466.20 | $33.80 | $463.75 | $2.45 |
How US sales tax rates are built
The rate you pay is usually several rates stacked together: a state rate, plus county, city, and sometimes special-district rates for transit or stadium financing. Combined rates exceed 10% in parts of Louisiana, Tennessee, Arkansas, and Washington, while Alaska, Delaware, Montana, New Hampshire, and Oregon have no state sales tax at all — though Alaska permits local taxes.
Because rates are set at the local level, they can differ between neighboring towns and change on short notice. The state rates below are the statutory state-level figures; local additions can add several points, and legislatures change rates. For anything official, verify the current combined rate for the specific delivery address with your state's revenue department.
| State | State rate | Notes |
|---|---|---|
| Alabama | 4% | Local rates often add 4 – 5 points |
| Alaska | 0% | Local taxes up to about 7.5% |
| Arizona | 5.6% | Local rates may add to this |
| Arkansas | 6.5% | Local rates may add to this |
| California | 7.25% | Includes mandatory local shares; districts add more |
| Colorado | 2.9% | Local rates often add 4 – 5 points |
| Connecticut | 6.35% | Local rates may add to this |
| Delaware | 0% | No sales tax; gross receipts tax on sellers |
| District of Columbia | 6% | Local rates may add to this |
| Florida | 6% | Local rates may add to this |
| Georgia | 4% | Local rates may add to this |
| Hawaii | 4% | General excise tax, passed to buyers |
| Idaho | 6% | Local rates may add to this |
| Illinois | 6.25% | Local rates may add to this |
| Indiana | 7% | Local rates may add to this |
| Iowa | 6% | Local rates may add to this |
| Kansas | 6.5% | Local rates may add to this |
| Kentucky | 6% | Local rates may add to this |
| Louisiana | 5% | Local rates often add 5 points or more |
| Maine | 5.5% | Local rates may add to this |
| Maryland | 6% | Local rates may add to this |
| Massachusetts | 6.25% | Local rates may add to this |
| Michigan | 6% | Local rates may add to this |
| Minnesota | 6.875% | Local rates may add to this |
| Mississippi | 7% | Local rates may add to this |
| Missouri | 4.225% | Local rates may add to this |
| Montana | 0% | Resort-area local taxes only |
| Nebraska | 5.5% | Local rates may add to this |
| Nevada | 6.85% | Local rates may add to this |
| New Hampshire | 0% | No sales tax |
| New Jersey | 6.625% | Local rates may add to this |
| New Mexico | 4.875% | Local rates may add to this |
| New York | 4% | Local rates may add to this |
| North Carolina | 4.75% | Local rates may add to this |
| North Dakota | 5% | Local rates may add to this |
| Ohio | 5.75% | Local rates may add to this |
| Oklahoma | 4.5% | Local rates may add to this |
| Oregon | 0% | No sales tax |
| Pennsylvania | 6% | Local rates may add to this |
| Rhode Island | 7% | Local rates may add to this |
| South Carolina | 6% | Local rates may add to this |
| South Dakota | 4.2% | Local rates may add to this |
| Tennessee | 7% | Local rates add up to 2.75 points |
| Texas | 6.25% | Local rates may add to this |
| Utah | 6.1% | Includes a mandatory 1.25% local share |
| Vermont | 6% | Local rates may add to this |
| Virginia | 5.3% | Includes a mandatory 1% local share |
| Washington | 6.5% | Local rates may add to this |
| West Virginia | 6% | Local rates may add to this |
| Wisconsin | 5% | Local rates may add to this |
| Wyoming | 4% | Local rates may add to this |
Common exemptions
Most states exempt or reduce tax on certain categories, and the boundaries can be unintuitive. Groceries are frequently exempt while prepared food is not, so a rotisserie chicken and a raw one may be taxed differently. Prescription drugs are widely exempt; over-the-counter medicines often are not. Clothing is exempt in a few states and taxed in most. Several states hold annual sales tax holidays for school supplies or emergency preparedness items.
Sales tax is destination-based in most states, meaning the rate depends on where the buyer takes delivery rather than where the seller is located. This is why online orders to different addresses are taxed at different rates.
| Category | Typical treatment | Notes |
|---|---|---|
| Unprepared groceries | Exempt or reduced in most states | A few states tax them at the full rate |
| Restaurant and prepared food | Taxed, often at a higher local rate | Includes hot deli items in many states |
| Prescription drugs | Exempt almost everywhere | Illinois taxes them at a reduced rate |
| Over-the-counter medicine | Taxed in most states | Exempt in a handful |
| Clothing | Taxed in most states | Exempt in Minnesota, New Jersey, Pennsylvania and, under limits, New York and Massachusetts |
| Digital goods and streaming | Increasingly taxed | Rules vary widely and change often |
| Shipping charges | Taxable in many states if the item is taxable | Separately stated shipping is exempt in some |
| Used vehicles | Taxed on the price, usually less trade-in | Collected at registration; a few states exempt private sales |