Sales Tax
A consumption tax levied by state and local governments on the sale of goods and some services. Rates vary by state and locality, ranging from 0% in states with no sales tax to over 10% in some jurisdictions.
Sales tax is a percentage-based tax added to the purchase price of taxable goods and services at the point of sale. It is collected by the seller and remitted to the state and local government. As of 2025, 45 states and the District of Columbia impose a statewide sales tax; the five without are Alaska, Delaware, Montana, New Hampshire, and Oregon. Many localities add their own sales tax on top of the state rate.
Combined state and local sales tax rates vary significantly: from 0% in no-sales-tax states to over 10% in parts of Louisiana, Tennessee, and Arkansas. Most states exempt essentials like groceries and prescription drugs from sales tax, though the specific exemptions vary by state. Services are increasingly subject to sales tax as states expand their tax base.
For federal income tax purposes, you may deduct state and local sales taxes as an itemized deduction as an alternative to deducting state and local income taxes — but not both. This option (known as the Sales Tax Deduction) is particularly valuable for residents of states with no income tax. The IRS provides optional tables to estimate your sales tax deduction, or you can deduct actual amounts from receipts. Either way, the deduction is subject to the $10,000 SALT cap.
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SALT Deduction
An itemized deduction for state and local taxes paid, including income tax (or sales tax) and property tax. Currently capped at $10,000 per return ($5,000 for married filing separately).
SALT Cap
The $10,000 annual limit on the federal deduction for state and local taxes (income/sales tax plus property tax), enacted by the Tax Cuts and Jobs Act of 2017.
State Income Tax
Income tax levied by individual states, in addition to federal income tax. Rates and structures vary widely — some states have no income tax, while others have rates up to 13.3%.
Property Tax
An annual tax levied by local governments on the assessed value of real property (land and buildings). Rates and assessment methods vary widely by jurisdiction.