Sales tax across the U.S. is not federally regulated. That means each state can impose its own sales tax on retail transactions or services. Certain municipalities and counties within each state also impose additional taxes, known as surtaxes, so even though some states have certain goods that are exempt from sales tax in a state, these items may be subject to local surtaxes.
The state with the highest sales tax in the U.S. is California with 7.25%. Puerto Rico is the U.S. territory with the highest at 11.5%.
States with no sales tax
Currently, five states have no sales tax in the U.S. These are Alaska, Delaware, Montana, New Hampshire, and Oregon. However, each of these states also has regulations on excise taxes, taxes charged on tourist locations, and income taxes. Also, cities or municipalities within these states can impose a local sales tax.
Sales Tax in Alaska
Alaska has no sales tax, but local governments can tax some goods and services. Anchorage and Fairbanks have no sales taxes, but Juneau has 5%. Alaskans pay the lowest gas tax in the U.S. – 8.95 cents per gallon. There is a flat sales tax rate on the distribution or wholesale price of alcoholic beverages. Motor fuel has an additional tax in Alaska, but consumers can claim a refund. All passengers on commercial vessels with overnight accommodations pay an excise tax of $34.50.
Sales Tax in Delaware
Corporate income tax is high in the state of Delaware, but the state has no property or sales taxes. However, certain types of businesses pay a gross receipts tax which is not technically charged to consumers but does affect the final selling price of some goods and services. Some distributors of goods and services also pay additional taxes, and excise taxes are levied per gallon on motor fuel and alcohol. Cigarettes are also taxed at $2.10 per packet.
Art dealers and collectors prefer doing business in the state of Delaware as a way of avoiding the high sales tax bills on works of art and other collectible pieces.
Sales tax in Montana
Local municipalities cannot collect sales tax in Montana. However, cities in Montana that have a permanent population of 5,500 people or less qualify to impose a low sales tax of up to 3%. This is also known as a resort and local option tax. These cities usually rely on tourism and have resorts, and the tax is imposed to support their infrastructure. These cities include Big Sky, Red Lodge, Whitefish and West Yellowstone. Car companies and lodging facilities also charge sales tax in Montana.
Sales tax in New Hampshire
New Hampshire has no state sales tax or income tax and municipalities cannot collect sales tax. However, dividends and interest of $2,400 and up are taxed by 5%. New Hampshire collects 9% Meals and Rooms Tax for prepared meals, short-term rentals and car rentals. These taxes are paid by the consumer and collected by the businesses providing the services. Phone services have a 7% tax, and real-estate sales are charged between $7.75 and $100. There is also a timber tax of 10% of the value at the time of cutting the wood (only if it is to be resold).
Sales tax in Oregon
Even though there is no sales tax in Oregon, municipalities and local governments can impose it on certain goods. Ashland has a 5% tax on prepared foods. Pre-packaged alcoholic beverages have an excise tax and there are also tobacco taxes. Personal income tax is quite high, but stocks and bonds are untaxed in Oregon.
E-commerce sales tax
Online sellers that have a responsibility to collect sales tax within a state must charge it to their buyers and remit the taxes back to the state. The basic rules that apply to online sellers are they collect sales tax from a customer who is in the same state as the business has sale nexus in, or the product they are selling is taxable in the state that the buyer is in. Certain business activities also create sales tax nexus in other states by having inventory, property, personnel, affiliates, or have gone to a show or event there. Also, if they make over a certain amount in a state it is known as economic nexus and they are liable for sales tax.
No matter what city you do business in, you can calculate your tax with the TRUiC sales tax calculator. This is an invaluable tool whether you are selling from a store, by mail, or online.