Sales Tax Calculator

Sales Tax Calculator

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A sales tax is a consumption tax paid to a government on selling certain goods and services. Usually, the seller collects the sales tax from the buyer as the buyer purchases. In most countries, the sales tax is called value-added tax (VAT) or goods and services tax (GST), a different form of consumption tax.

In some countries, the listed prices for goods and services are the before-tax value, and a sales tax is only applied during the purchase. In other countries, the listed prices are the final after-tax values, which include the sales tax.

U.S. Sales Tax

In the United States, sales tax at the federal level does not exist. At the state level, all (including the District of Columbia, Puerto Rico, and Guam) but five states do not have statewide sales tax. These are Alaska, Delaware, Montana, New Hampshire, and Oregon. States that impose a sales tax have different rates, and even within states, local or city sales taxes can come into play.

Unlike VAT (which is not imposed in the U.S.), sales tax is only enforced on retail purchases; most transactions of goods or services between businesses are not subject to sales tax.

The sales tax rate ranges from 0% to 16% depending on the state and the type of good or service, and all states differ in their enforcement of sales tax. In Texas, prescription medicine and food seeds are exempt from taxation.

Vermont has a 6% general sales tax, but an additional 10% tax is added to purchases of alcoholic drinks that are immediately consumed. These are only several examples of differences in taxation in different jurisdictions. Rules and regulations regarding sales tax vary widely from state to state.

On average, the impact of sales tax on Americans is about 2 percent of their income. Sales tax provides nearly one-third of state government revenue and is second only to the income tax in terms of importance as a source of revenue.

Reliance on the sales tax varies widely by state. Sales taxes are much more important in the South and West than they are in New England and the industrial Midwest. Florida, Washington, Tennessee, and Texas all generate more than 50 percent of their tax revenue from the sales tax, and several of these states raise nearly 60 percent of their tax revenue from the sales tax. New York, on the other hand, only raises about 20 percent of its revenues from the sales tax.

The following is an overview of the sales tax rates for different states.

StateGeneral State Sales TaxMax Tax Rate with Local/City Sale Tax
Alabama4%13.50%
Alaska0%7%
Arizona5.60%10.73%
Arkansas6.50%11.63%
California7.25%10.50%
Colorado2.90%10%
Connecticut6.35%6.35%
Delaware0%0%
District of Columbia6%6%
Florida6%7.50%
Georgia4%8%
Guam4%4%
Hawaii4.17%4.71%
Idaho6%8.50%
Illinois6.25%10.25%
Indiana7%7%
Iowa6%7%
Kansas6.50%11.50%
Kentucky6%6%
Louisiana4.45%11.45%
Maine5.50%5.50%
Maryland6%6%
Massachusetts6.25%6.25%
Michigan6%6%
Minnesota6.88%7.88%
Mississippi7%7.25%
Missouri4.23%10.85%
Montana0%0%
Nebraska5.50%7.50%
Nevada6.85%8.25%
New Hampshire0%0%
New Jersey6.63%12.63%
New Mexico5.13%8.69%
New York4%8.88%
North Carolina4.75%7.50%
North Dakota5%8%
Ohio5.75%8%
Oklahoma4.50%11%
Oregon0%0%
Pennsylvania6%8%
Puerto Rico10.50%11.50%
Rhode Island7%7%
South Carolina6%9%
South Dakota4%6%
Tennessee7%9.75%
Texas6.25%8.25%
Utah5.95%8.35%
Vermont6%7%
Virginia5.30%6%
Washington6.50%10.40%
West Virginia6%7%
Wisconsin5%6.75%
Wyoming4%6%

Sales Tax vs VAT

A sales tax is a consumption tax paid to a government on selling certain goods and services. Usually, the sales tax is not collected during the different stages of the supply chain. Only during the final stage does the seller collect the sales tax from the end buyers as they make purchases.

Sales tax is only imposed once when the consumer of the product pays the vendor. VAT is superior to sales tax in regards to preventing tax evasion or malpractice because taxes are applied during the entire process of production and distribution, rather than as a single instance at the end. However, because of the intricate paper trail that VAT requires, it tends to be costly to administer compared to sales tax.

Even though VAT is imposed at multiple instances for any good or service, double taxation (tax paid on tax) does not occur. Because VAT is only imposed on any value-added, any tax applied during preceding stages can be deducted, preventing a cascading effect (as shown in the example). On the other hand, double taxation can happen with sales tax.

Statistics have shown that VAT affects lower-income earners more disproportionately than a sales tax because of the regressive nature of VAT. However, this can be offset by the proper implementation of progressive regulations, such as seen in European models of VAT.

It is not uncommon for the words “sales tax” and “VAT” to be used interchangeably.

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