Sales tax in the United States is one of the most complex tax regimes due to its decentralized nature. Unlike federal income tax, sales tax is governed at the state and local levels, resulting in a patchwork of tax rates, exemptions, and filing rules. For businesses, understanding and complying with the specific sales tax requirements of each state where they operate is critical to avoid penalties and audits.
This guide provides an overview of sales tax rates and notable rules across all 50 states, helping businesses and tax professionals manage compliance efficiently and effectively.
Why Understanding State-by-State Rules Matters
Each state has the authority to impose and regulate its own sales tax. Some states even allow counties, cities, and special districts to add local taxes. This means businesses must calculate, collect, and remit the correct amount of tax based on the customer’s location. Additionally, rules about taxability, exemptions, filing frequency, and registration requirements vary widely.
PEAK Business Consultancy Services, a tax consulting firm based in India, offers specialized support for U.S. CPA firms and businesses to manage multi-state sales tax compliance. With years of experience handling U.S. sales and use tax filings, PEAK BCS is your reliable partner for outsourcing. Visit our website to learn more.
Sales Tax Overview by State
1. Alabama
State rate: 4%. Local rates can bring the total to over 11%. Remote sellers must register if they exceed $250,000 in sales.
2. Alaska
No state sales tax, but local jurisdictions may impose local sales taxes up to 7.5%. Compliance varies by borough and city.
3. Arizona
State rate: 5.6%. Arizona has a Transaction Privilege Tax (TPT) structure. Local and county rates vary. Economic nexus threshold is $100,000.
4. Arkansas
State rate: 6.5%. With local taxes, the combined rate can exceed 11%. Remote sellers with over $100,000 in sales or 200 transactions must comply.
5. California
State base rate: 7.25%. Local rates can push this above 10.25%. Economic nexus applies above $500,000 in sales.
6. Colorado
State rate: 2.9%. Local rates apply and are managed separately. Remote sellers with over $100,000 in sales must register.
7. Connecticut
State rate: 6.35%. Remote sellers with $100,000 in sales and 200 transactions are required to register and collect sales tax.
8. Delaware
No state or local sales tax. However, a gross receipts tax applies to businesses.
9. Florida
State rate: 6%. Local option taxes may increase the rate. Remote sellers with over $100,000 in sales are subject to economic nexus rules.
10. Georgia
State rate: 4%. Local jurisdictions can add up to 5%. Economic nexus applies at $100,000 or 200 transactions.
11. Hawaii
No traditional sales tax. Instead, a General Excise Tax (GET) applies at 4% (4.5% in some counties). Applies to most transactions, including services.
12. Idaho
State rate: 6%. Local sales tax is rare. Remote sellers must collect if they exceed $100,000 in sales.
13. Illinois
State rate: 6.25%. Local taxes apply. Economic nexus applies above $100,000 or 200 transactions annually.
14. Indiana
State rate: 7%. No local taxes. Remote sellers with more than $100,000 in sales or 200 transactions must register.
15. Iowa
State rate: 6%. Local surtaxes apply. Remote sellers have an economic nexus threshold of $100,000 or 200 transactions.
16. Kansas
State rate: 6.5%. Local taxes may apply. Kansas requires all remote sellers to collect, regardless of sales volume.
17. Kentucky
State rate: 6%. No local taxes. Remote sellers with more than $100,000 or 200 transactions must register.
18. Louisiana
State rate: 4.45%. Local rates vary widely. Remote sellers with $100,000 in sales or 200 transactions must collect.
19. Maine
State rate: 5.5%. No local sales tax. Remote sellers over $100,000 in sales or 200 transactions must register.
20. Maryland
State rate: 6%. No local sales tax. Remote sellers over $100,000 in sales or 200 transactions must collect tax.
21. Massachusetts
State rate: 6.25%. No local tax. Economic nexus is triggered at $100,000 in sales.
22. Michigan
State rate: 6%. No local tax. Economic nexus threshold is $100,000 or 200 transactions.
23. Minnesota
State rate: 6.875%. Local taxes may apply. Economic nexus applies at $100,000 or 200 transactions.
24. Mississippi
State rate: 7%. No local sales tax. Remote sellers must collect if sales exceed $250,000.
25. Missouri
State rate: 4.225%. Local taxes apply. Missouri began enforcing economic nexus in 2023 at $100,000 in sales.
26. Montana
No state or local sales tax. Some localities impose taxes on specific items such as lodging.
27. Nebraska
State rate: 5.5%. Local rates can bring the total up to 7.5%. Economic nexus applies above $100,000 or 200 transactions.
28. Nevada
State rate: 6.85%. With local taxes, the rate can go above 8%. Remote sellers with $100,000 or 200 transactions must register.
29. New Hampshire
No state sales tax. However, certain businesses are subject to other state taxes like the Business Enterprise Tax.
30. New Jersey
State rate: 6.625%. Urban Enterprise Zones may have reduced rates. Remote sellers over $100,000 or 200 transactions must register.
31. New Mexico
Gross Receipts Tax instead of sales tax, currently at 5.125% state rate. Local surtaxes apply.
32. New York
State rate: 4%. Local taxes can increase the total rate up to 8.875%. Economic nexus applies at $500,000 and 100 transactions.
33. North Carolina
State rate: 4.75%. Local rates apply. Remote sellers must register if they exceed $100,000 or 200 transactions.
34. North Dakota
State rate: 5%. Local taxes apply. Economic nexus applies at $100,000 in sales.
35. Ohio
State rate: 5.75%. Local jurisdictions can add up to 2.25%. Economic nexus applies above $100,000 or 200 transactions.
36. Oklahoma
State rate: 4.5%. Local rates can exceed 8%. Remote sellers must register if sales exceed $100,000.
37. Oregon
No state or local sales tax.
38. Pennsylvania
State rate: 6%. Local surtaxes in Philadelphia and Allegheny County. Economic nexus applies at $100,000.
39. Rhode Island
State rate: 7%. No local tax. Economic nexus applies at $100,000 or 200 transactions.
40. South Carolina
State rate: 6%. Local taxes may increase the total to 9%. Remote sellers over $100,000 must register.
41. South Dakota
State rate: 4.2%. Local rates apply. This state pioneered economic nexus with $100,000 or 200 transaction thresholds.
42. Tennessee
State rate: 7%. Local rates can bring the total to over 9.5%. Economic nexus applies at $100,000.
43. Texas
State rate: 6.25%. Local surtaxes can raise it to 8.25%. Remote sellers above $500,000 must register.
44. Utah
State rate: 4.85%. Combined with local rates, it can exceed 7%. Economic nexus is at $100,000 or 200 transactions.
45. Vermont
State rate: 6%. Local surtaxes apply. Remote sellers must register at $100,000 or 200 transactions.
46. Virginia
State rate: 5.3%. Local surtaxes apply. Economic nexus applies at $100,000 in sales.
47. Washington
State rate: 6.5%. Local surtaxes apply. Economic nexus threshold is $100,000 in sales.
48. West Virginia
State rate: 6%. Local rates can increase total tax rate. Remote sellers must register at $100,000 or 200 transactions.
49. Wisconsin
State rate: 5%. Local sales taxes may apply. Economic nexus applies at $100,000 or 200 transactions.
50. Wyoming
State rate: 4%. Local jurisdictions can impose up to 2%. Economic nexus applies at $100,000 or 200 transactions.
Need Help with Multi-State Sales Tax Compliance?
Managing state-by-state sales tax compliance can be overwhelming, especially for growing businesses and CPA firms with a broad client base. That’s where PEAK Business Consultancy Services comes in. With a strong background in U.S. taxation and a dedicated team in India, we provide seamless support for sales tax registration, calculation, filing, and audit support.
Explore how we can assist your firm by visiting www.peakbcs.com.
Conclusion
Sales tax rules in the United States vary drastically across states, making compliance a complex but necessary part of doing business. Understanding these differences is critical for accurate collection, timely filing, and minimizing audit risk. With the right partner, like PEAK BCS, businesses and tax professionals can navigate this complexity with confidence and ease.
