Sales tax calculator

Our sales tax calculator can help you determine the the amount of sales tax that should be added to a purchase.

Page written by AI. Reviewed internally on May 16, 2024.

This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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What is sales tax?

Sales tax is a type of consumption tax imposed by governments on the sale of goods and services. It’s typically a percentage of the purchase price and is collected by the seller at the point of sale. The seller then remits the collected tax to the government.

The purpose of sales tax is to generate revenue for government agencies. This revenue is used to fund public services such as education, healthcare, infrastructure, and various other government functions.

It’s important to note that sales tax rates and regulations can vary widely between different regions, states, and countries. In some places, sales tax may be a single, uniform rate applied to most goods and services. In others, there may be different rates for different types of items or exemptions for certain goods like groceries or medical supplies.

In the UK, a similar tax is called Value Added Tax (VAT), and it operates on a slightly different principle. VAT is applied at each stage of the supply chain, not just at the point of sale, and is ultimately borne by the end consumer.

When do you need to pay sales tax?

Sales tax is typically levied on the sale of goods and certain services at the point of purchase. The specifics of when and how sales tax is collected can vary based on state and local regulations. Generally, if you’re purchasing taxable goods or services in the United States, you’ll likely encounter sales tax.

What items need to have sales tax?

Most tangible goods, such as clothing, electronics, furniture, and groceries, are subject to sales tax in many states. Additionally, certain services, like dining at restaurants or staying at hotels, may also incur sales tax. However, exemptions and rates can vary by state, so it’s essential to check local regulations.

Sales tax exemptions:

Some items or transactions may be exempt from sales tax, depending on the state and the nature of the purchase. Common exemptions include essential items like food, prescription drugs and certain types of clothing. Additionally, some states offer exemptions for specific industries or purchases made for resale.

States with no sales tax:

Several states in the United States do not impose a statewide sales tax. These states include Alaska, Delaware, Montana, New Hampshire and Oregon. However, it’s important to note that local jurisdictions within these states may still impose local sales taxes.

Who collects sales tax?

Sales tax is typically collected by the seller at the point of purchase. Businesses are responsible for collecting the appropriate sales tax from customers and remitting it to the relevant tax authorities.

Is my business required to collect sales tax?

Whether your business is required to collect sales tax depends on various factors, including your location, the nature of your business and the states in which you have nexus (a significant presence). It’s crucial to understand your sales tax obligations and comply with relevant regulations.

What happens if you don't collect sales tax?

Failure to collect and remit sales tax as required by law can result in penalties, fines and legal consequences. It’s essential for businesses to understand and comply with sales tax regulations to avoid potential liabilities.