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 SALT cap (OBBBA 2025+: $40,000, phasing out above $500,000 MAGI to a $10,000 floor; pre-OBBBA 2018–2024: $10,000).
How it works
Sales tax is a percentage added to the price of taxable goods and, increasingly, services at the point of sale, collected by the seller and remitted to state and local governments. As of 2025, 45 states plus the District of Columbia impose a statewide sales tax; the five that don't are Alaska, Delaware, Montana, New Hampshire, and Oregon. Many cities and counties layer their own local sales tax on top of the state rate, so the combined rate you actually pay depends heavily on exactly where the sale happens.
Combined state and local rates range from 0% in the no-sales-tax states to over 10% in parts of Louisiana, Tennessee, and Arkansas. Most states carve out groceries and prescription drugs from the tax base, though which specific items qualify for the exemption varies a lot state to state, and more services are being pulled into the taxable base as states look to broaden revenue.
On your federal return, you can deduct state and local sales tax as an itemized deduction instead of state and local income tax — but not both, you have to pick one. This Sales Tax Deduction option is especially valuable if you live in a state with no income tax, since the income-tax alternative would otherwise give you nothing to deduct. You can use IRS optional tables to estimate the deduction or track actual receipts, but either way the total is still subject to the overall SALT cap.
Example: choosing the sales tax deduction over income tax
A Texas resident has no state income tax to deduct, so the sales tax alternative is their only real SALT option. Using the IRS optional table plus actual receipts for a major purchase, they estimate roughly $3,200 in state and local sales tax paid on the year's spending.
They itemize and claim that $3,200 as their SALT-related deduction instead of a (nonexistent) state income tax deduction — still subject, along with any property tax also claimed, to the SALT cap.
Look up sales tax rates by state
Use our free tool to get a personalized estimate.
See full calculatorFrequently asked questions
Which states don't have a sales tax?
Can I deduct both sales tax and income tax on my federal return?
Are groceries taxed at the same sales tax rate as other purchases?
Related Terms
SALT Deduction
An itemized deduction for state and local taxes paid, including income tax (or sales tax) and property tax. Under OBBBA (2025+), capped at $40,000 per return ($20,000 MFS) with phaseout above $500,000 MAGI to a $10,000 floor. Pre-OBBBA (2018–2024) the cap was $10,000 flat.
SALT Cap
The annual limit on the federal deduction for state and local taxes. Pre-OBBBA (2018–2024): $10,000. OBBBA (2025+): $40,000 ($20,000 MFS) with phaseout above $500,000 MAGI to a $10,000 floor.
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.