How to calculate sales tax
Sales tax is added to the purchase price of many products and services and can be charged by state and/or local governments. You can calculate it by multiplying the price of an item or service by the tax rate charged by the state and/or local government.
Calculating sales tax before you buy can help you understand your total cost. That can be especially important when you purchase big-ticket items like electronics or home appliances.
What you’ll learn:
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Sales tax is added to the price of a product or service and paid by the consumer at the point of sale.
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Sales tax rates vary from state to state. Some local and municipal governments also charge sales tax.
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To calculate sales tax, find the total tax rate you’ll be charged by state and/or local governments and then multiply it by the price of a product or service.
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U.S. states that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire and Oregon.
What is sales tax?
Sales tax is a common type of consumption tax. It’s applied to the price of a product or service and paid by consumers at the point of sale. Sales tax can be added to everything, from clothing and home appliances to services like accounting and auto repair.
Sales tax is charged at the state level by most states in the U.S. But local and municipal governments may also charge sales tax.
Sales tax exemptions
Most states exempt certain purchases from sales tax. The exemptions vary by state. Items that might be exempt include food, medicine and utilities.
Foreign diplomats working in the U.S. may also be exempt from paying certain taxes, including sales tax.
Steps to calculate sales tax
You can use the following steps to calculate sales tax:
1. Find the total tax rate percentage
Start by determining the applicable tax rate in your area. Because sales tax can be imposed at the state, city and local levels, you might need to account for multiple taxes by adding them together.
2. Convert the total tax rate percentage to a decimal
Once you have your total sales tax rate as a percentage, convert it to a decimal by dividing it by 100.
3. Calculate the total sales tax
Multiply the total tax rate, expressed as a decimal, by the price of the product or service.
4. Determine the total cost of the product or service
Add the total sales tax, expressed as a dollar amount, to the cost of the product or service to calculate your total purchase price.
Sales tax calculation example
Say you’re in Philadelphia—which charges both a state sales tax and a city sales tax—and buying a $1,000 computer from a local electronics store. You would use the following steps to calculate sales tax:
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Find the total tax rate percentage: 6% Pennsylvania state sales tax + 2% Philadelphia city sales tax = 8% total tax rate percentage
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Convert to a decimal: 8% total tax rate percentage ÷ 100 = 0.08 total tax rate
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Calculate the total sales tax: 0.08 total tax rate × $1,000 price of computer = $80 total sales tax
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Determine the total cost of the product or service: $80 total sales tax + $1,000 cost of computer = $1,080 total purchase price
Sales tax FAQ
Still curious about sales tax? Here are the answers to some frequently asked questions:
What states don’t charge sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon don’t charge sales tax.
What state has the highest sales tax?
As of 2026, California has the highest state sales tax rate at 7.25%, followed by Tennessee, Rhode Island, Mississippi and Indiana at 7%.
What state has the lowest sales tax?
As of 2026, Colorado has the lowest state sales tax rate at 2.90%, followed by Alabama, Georgia, Hawaii, New York and Wyoming at 4%. But Alaska, Delaware, Montana, New Hampshire and Oregon don’t charge sales tax at all.
What is use tax?
Use tax is a form of sales tax. Use taxes typically apply when something is purchased in a state or locality without a sales tax but used in a place where the same product or service would have been taxed if it had been purchased there.
Key takeaways: Calculating sales tax
Sales tax is a common consumption tax that’s added by most states to consumer purchases. Knowing how to calculate sales tax can help you determine the final price of an item or a service you’re thinking about purchasing.
Sales tax is just one type of consumption tax that government entities can charge. Learn more about consumption taxes and how they can affect the final purchase price.
