The money owed on purchases can be confusing due to differences in state sales tax rates. Adding to that confusion is the World Wide Web, which makes purchasing merchandise from a company doing business in another state an everyday affair.
In this article, we're going to briefly cover the topic of state sales tax. As part of that discussion, we'll explain why it's collected, and how the money is used. Then we're going to finish up with a complete listing of the sales tax rates that are in effect for each of the 50 states for the calendar year 2021.
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According to information gathered by the U.S. Census Bureau, sales tax accounts for approximately 25% of all the money needed to run state and local governments. Money collected is used to provide essential services of state and local governments such as education, police, and fire protection.
Unlike an income tax, sales tax is charged on purchases of goods and services, and the amount charged will vary from state to state. Money collected in this manner is known as a consumption tax. In retail stores, prices appearing on merchandise are typically quoted before applying a sales tax.
At one time, the Internet provided consumers a convenient way of avoiding sales tax, and in many ways it still does. Most online stores will only charge a state sales tax if they also have a physical presence (such as a warehouse or corporate office) in the consumer's state.
Generally, there are three major categories of exceptions to this tax: food, prescription medications, and over-the-counter medications. In the section below, we're going to provide a brief narrative by state, mentioning if these exemptions apply.
Listed below are the rates that were in effect as of January 2021. Sales tax rates, like their counterpart state income tax rates, don't change very often. This list will likely be a good guide for the year 2022 too.
The state of Alabama has a 4.00% sales tax, with an exemption for prescription medications.
The state of Alaska has no sales tax.
The state of Arizona has a 5.60% transaction privilege tax, with an exemption for prescription medications, and food.
The state of Arkansas has a 6.50% sales tax, with an exemption for prescription medications, and a 1.5% tax on food items.
The state of California has a 7.25% sales tax, with an exemption for food and prescription medications. This includes a statewide local tax of 1.0% in California. California's tax rate may be adjusted annually according to a formula based on balances in a general fund and the school fund.
The state of Colorado has a 2.90% sales tax, with exemptions for food and prescription medications.
The state of Connecticut has a 6.35% sales tax with exemptions for food, prescription medications, and over-the-counter medications.
The state of Delaware has no state sales tax but has a Gross Receipts Tax of 2.07% for some business activities.
The District of Columbia has a 6.00% sales tax with an exemption for food, prescription medications and over-the-counter medications.
The state of Florida has a 6.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Georgia has a 4.00% sales tax with exemptions for food and prescription medications. However, food sales may be subject to local sales taxes.
The state of Hawaii has a 4.00% sales tax with an exemption for prescription medications. An income credit to compensate poor households may apply.
The state of Idaho has a 6.00% sales tax with an exemption for prescription medications. An income credit to compensate poor households may apply.
The sate of Illinois has a 6.25% sales tax with a local tax of 1% on food, prescription medications and over-the-counter medications.
The state of Indiana has a 7.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Iowa has a 6.00% sales tax with exemptions for food and prescription medications.
The state of Kansas has a 6.50% sales tax with an exemption for prescription medications. An income credit to compensate poor households may apply.
The state of Kentucky has a 6.00% sales tax with exemptions for food and prescription medications.
The state of Louisiana has a 4.45% sales tax with exemptions for food and prescription medications. Food sales may be subject to local sales taxes.
The state of Maine has a 5.50% sales tax with exemptions for food and prescription medications.
The state of Maryland has a 6.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Massachusetts has a 6.25% sales tax with exemptions for food, essential items and prescription medications.
The state of Michigan has a 6.00% sales tax with exemptions for food and prescription medications.
The state of Minnesota has a 6.875% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Mississippi has a 7.00% sales tax with an exemption for prescription medications.
The state of Missouri has a 4.225% sales tax with an exemption for prescription medications. Food is taxed at 1.225%.
The state of Montana has no state sales tax.
The state of Nebraska has a 5.50% sales tax with exemptions for food and prescription medications.
The state of Nevada has a 6.85% sales tax with exemptions for food and prescription medications.
The state of New Hampshire has no state sales tax.
The state of New Jersey has a 6.625% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of New Mexico has a 5.125% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of New York has a 4.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of North Carolina has a 4.75% sales tax with exemptions for food and prescription medications. Food may also be subject to local sales taxes.
The state of North Dakota has a 5.00% sales tax with exemptions for food and prescription medications.
The state of Ohio has a 5.75% sales tax with exemptions for food and prescription medications; however, this varies by geography.
The state of Oklahoma has a 4.50% sales tax with an exemption for prescription medications.
The state of Oregon has no state sales tax.
The state of Pennsylvania has a 6.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Rhode Island has a 7.00% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of South Carolina has a 6.00% sales tax with an exemption for prescription medications.
The state of South Dakota has a 4.50% sales tax with an exemption for prescription medications. An income credit to compensate poor households may apply.
The state of Tennessee has a 7.00% sales tax with and exemption for prescription medications. Food is taxed at 5.50%.
The state of Texas has a 6.25% sales tax with exemptions for food, prescription medications and over-the-counter medications.
The state of Utah has a 6.10% sales tax with an exemption for prescription medications. Food is taxed at 1.25%.
The state of Vermont has a 6.00% sales tax with an exemption for food, prescription medications and over-the-counter medications.
The state of Virginia has a 5.30% sales tax with an exemption for prescription medications and over-the-counter medications. Food is taxed at 2.5% and includes a statewide local tax of 1.0%.
The state of Washington has a 6.50% sales tax with an exemption for food and prescription medications.
The state of West Virginia has a 6.00% sale tax with an exemption for prescription medications. Food is taxed at 1.0%. Effective July1, 2013 food was exempt from sales tax.
The state of Wisconsin has a 5.00% sales tax with exemptions for food and prescription medications.
The state of Wyoming has a 4.00% sales tax with an exemption for prescription medications. Wyoming's tax rate may be adjusted annually according to a formula based on balances in a general fund and a school fund. An income credit to compensate poor households may apply.
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