Sales tax rates vary significantly across the United States. Some states levy the highest sales tax rates nationwide, while others have the lowest.
It’s important to keep in mind that sales tax will increase the overall price of your purchases. You may spend more than planned if you don’t factor in sales tax. So, it’s wise to know more about it.
To help you, we’ve compiled a guide detailing the states with the highest and lowest sales tax rates and their combined state and local sales tax rates.
What Items Are Taxable?
As a rule of thumb, all tangible personal property (TPP) is taxable under sales tax laws. It refers to goods that have a physical existence. However, some physical goods are not counted as tangible personal property and are exempt from sales tax requirements.
Most states exempt groceries from TPP because it is a necessity and are frequently purchased by consumers. You must check your state’s Department of Revenue’s website to understand taxable and non-taxable goods.
States with Highest Sales Tax Rates
Some states in the USA charge a higher rate than others, making them some of the most expensive states for consumers. So, which state has the highest sales tax? The following 11 states have the highest state sales tax rates in the US.
States with Lowest Sales Tax Rates
States with the lowest sales taxes have rates below 5.00%. The following have comparatively lower base sales tax rates than others.
States with No Sales Tax
Did you know that some states do not charge state sales tax at all? It includes five US states, of which four have a complete state and local sales tax exemption. The following are the states with no sales tax.
Among these states with zero sales tax, only Alaska has a locally imposed sales tax on some goods and services. However, despite having no statewide sales taxes, businesses must still learn about the unique tax systems in the NOMAD states to stay compliant.
Combined State and Local Sales Tax Rates
When discussing a state’s combined sales tax rate, we consider the following two taxes.
- State Sales Tax: Represents the sales tax levied by the state government on sales of goods and services. Forty-six states, including the District of Columbia, impose a state sales tax.
- Local Sales Tax: Besides the state, the government allows localities to charge local sales tax on sales of taxable products and services. This rate varies from the state sales tax rate and may sometimes exceed it. Thirty-eight states charge local sales tax to customers.
The above lists present state-by-state ranking on the basis of state sales tax. However, local sales tax is an essential factor that you must pay attention to when discussing sales tax.
States with Highest Local Sales Tax Rates
To get any state’s combined sales tax rates, you need to determine the state’s local sales tax rates first. Below are 11 states with the highest average or minimum local sales tax rates.
- Alabama: 5.44%
- Louisiana: 5.11%
- Colorado: 4.96%
- New York: 4.54%
- Oklahoma: 4.55%
- Missouri: 4.19%
- Georgia: 3.44%
- Arkansas: 2.98%
- Washington: 2.97%
- Arizona: 2.92%
- New Mexico: 2.79%
Keep in mind that the average or minimum local sales tax rate is different from the maximum local rate in a state.
For instance, Colorado’s maximum local sales tax rate is 8.30%, which is higher than Alabama’s 8.00% maximum local sales tax rate. However, a state’s combined sales tax rate is typically calculated based on the average local sales tax rate of a state, not by its maximum local rate.
States with Highest Combined Sales Tax
The following states currently have the highest combined sales tax rates, ranging from 10.00% to 8.00%.
- Louisiana: 10.11%
- Tennessee: 9.61%
- Arkansas: 9.48%
- Washington: 9.47%
- Alabama: 9.44%
- Oklahoma: 9.05%
- California: 8.98%
- Illinois: 8.92%
- Kansas: 8.78%
- New York: 8.54%
- Arizona: 8.52%
- Missouri: 8.41%
- Nevada: 8.24%
- Texas: 8.20%
- Minnesota: 8.13%
States with Lowest Combined Sales Tax
- Alaska: 1.82%
- Hawaii: 4.50%
- Maine: 5.50%
- Wyoming: 5.56%
- Wisconsin: 5.72%
- Virginia: 5.77%
States with Gross Receipt Tax
People often compare gross receipts tax with sales tax. Gross receipt tax refers to the levy or tax paid by the seller of the goods. On the other hand, sales tax is levied upon customers or the buyers of the goods.
The following are the states with gross receipt tax.
- Delaware
- Nevada
- Ohio
- Oregon
- Tennessee
- Texas
- Washington
Variation in Sales Tax
Besides state sales tax rates, the base rate also varies among states. What is taxable in one state may not be taxable in another.
For instance, some states like New Jersey exempt
clothing from tax brackets. Meanwhile, some states only set specific sales tax limitations, while others regard clothing as fully taxable goods.
From the rates levied to what is taxable, all 50 states have their own set of laws and statutes. Not only that, these regulations are subject to change. That means states with low tax rates may become high tax-charging states and vice versa.
Therefore, as a business owner, you must always keep track and conduct a comprehensive analysis of various states’ sales tax laws to be compliant.
Why Sales Tax Rates Differ Across States
Sales tax rates are not uniform across the United States because each state designs its own tax structure based on economic priorities and policy decisions.
Some states choose higher sales tax rates to support public programs, while others rely more heavily on different types of taxes, such as income or property taxes. These choices shape how sales tax is applied and why rates vary from one region to another.
Several factors influence how rates are set:
- State funding priorities: Governments determine how to balance revenue sources to fund infrastructure, education, healthcare, or public safety. States that rely more on consumer spending often maintain higher base sales tax rates compared to states that collect revenue through other means.
- Local government authority: In many states, counties or cities have the ability to add their own taxes on top of the state rate. This layered structure means a state’s base rate alone does not always represent the full percentage consumers encounter.
- Economic landscape: Areas with strong tourism, retail activity, or population growth may use sales tax as a stable revenue source. Economic conditions and consumer behavior can influence whether a state keeps rates low or gradually increases them over time.
- Policy changes over time: Legislative decisions and voter-approved measures can adjust rates or modify taxable categories, which contributes to long-term differences between states.
Because of these variations, comparing only the base rate may not accurately reflect overall purchasing costs or how businesses operate in different regions.
How Local Jurisdictions Affect What You Actually Pay
State sales tax is only one part of the total percentage applied to a purchase. Local governments such as cities, counties, or special districts can add additional taxes, which means the final amount paid at checkout may vary even within the same state.
This is why two neighboring cities may have noticeably different totals despite sharing the same statewide rate.
Here are a few key points to understand:
- Local taxes vary by location: The total rate can change depending on where a transaction takes place or where a product is delivered. Local authorities may introduce small percentage increases to support community projects or regional services.
- Special districts create layered rates: Certain areas include additional taxes tied to transportation systems, tourism development, or public improvement initiatives. These smaller additions can increase the combined rate without changing the state’s base tax.
- Rates can shift within short distances: Moving from one county or city to another may result in a different combined percentage. This variation highlights why looking only at statewide averages may not show the full picture.
- Local decisions evolve over time: Cities and counties can vote to introduce or adjust local taxes, which means the combined rate in a specific area may change independently from the state rate.
Reviewing both the state and local components helps readers understand why the amount paid at checkout may differ from one location to another.
Why Combined Sales Tax Rates Matter More Than State Rates Alone
Looking only at a state’s base rate does not always show the full cost of a purchase. Many buyers and sellers focus on the combined rate because it reflects the actual percentage applied at checkout.
Understanding combined rates helps in several ways:
- Pricing accuracy: Businesses can estimate the final price customers will see after tax is added.
- Location planning: Sellers operating in multiple areas can compare how total rates differ from one city to another.
- Consumer awareness: Buyers can better anticipate how much tax will be added to everyday purchases.
Since local taxes can raise or lower the overall percentage, combined rates provide a more realistic view than state rates alone.
How Changes in Sales Tax Rates Can Impact Businesses
Sales tax rates and rules are not permanent. States and local governments may update rates or adjust taxable categories over time, which can affect both consumers and sellers.
Some common impacts include:
- Pricing adjustments: When a rate changes, the final amount customers pay at checkout may increase or decrease. Businesses may need to review product pricing displays, promotional discounts, or shipping calculations to make sure totals remain accurate and transparent for buyers.
- System configuration updates: Ecommerce platforms, accounting tools, or point-of-sale systems often rely on location data to apply tax automatically. If rates change, sellers may need to verify that their systems are using updated information so that orders reflect the correct percentages across different jurisdictions.
- Operational planning: Businesses that operate in several regions may notice shifts in demand when local tax rates change. For example, higher combined rates in one area could influence where customers choose to buy or how businesses prioritize certain markets.
- Internal reporting checks: Even if tax collection settings remain active, businesses should periodically review sales reports to confirm that updated rates are reflected correctly in their records. Regular reviews help identify discrepancies early before they affect financial summaries.
Monitoring updates does not require constant manual research, but staying aware of changes allows businesses to adjust smoothly and avoid unexpected disruptions in their checkout or reporting processes.
Sales Tax Rates Frequently Asked Questions
1. What is the highest sales tax rate in the USA?
As of 2026, the highest state sales tax in the USA is 7.25% in California. Meanwhile, the highest average local sales tax in the USA is 5.43% in Alabama. However, Colorado has the highest maximum local sales tax rate of 8.30%. The highest combined sales tax rate in the USA is 10.11% in Louisiana.
2. What is the lowest sales tax rate in the USA?
Colorado has the lowest state sales tax rate of only 2.90% as of 2026. On the other hand, Alaska has the lowest local and combined sales tax rate of 1.89%.
3. Which state has the highest sales tax rate?
California currently holds the title of the state with the highest state sales tax rate, which is 7.25%. Meanwhile, Louisiana has the highest combined sales tax rate of 10.11%.
4. What are sales taxes used for?
Sales taxes are used to finance several public services. It includes improving infrastructure, health, education, and emergency services. The state decides where and how to spend the collected sales tax for the betterment of the people.
5. Are ecommerce sellers required to collect sales tax?
Yes, ecommerce sellers must collect sales tax once they establish a sales tax nexus in a state. A nexus is typically determined by a specific amount of sales or the number of transactions made in a state. To stay compliant, remote sellers must always know the thresholds and other legal requirements of the states where they are doing business.
Need Help with Sales Tax?
Although sales tax is only a part of the complex taxation structure in the USA, it still isn’t very easy to understand and comply with. Thus, it’s always better to rely on experts to ensure error-free sales tax compliance and prevent any penalties.
Book a call with TaxHero and let professionals handle the varying tax rates and compliance requirements in any and every state.
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