How to Calculate Sales Tax
Sales tax is calculated as a percentage of the purchase price. The formula is straightforward:
Tax Amount = Price × (Tax Rate ÷ 100)
Total Price = Price + Tax Amount
For example, a $250 item in Texas (6.25% state rate): $250 × 0.0625 = $15.63 tax, making the total $265.63. With Texas's average local tax of about 1.95%, the typical combined rate near 8.20% would push the total to roughly $270.50.
State vs. Local Sales Tax
The "state rate" is the base imposed by the state government. Most states also allow counties, cities, and special districts to add their own sales tax on top — sometimes pushing the total well above 10%. The combined rate column above uses Tax Foundation's population-weighted average local rate; your specific city or county may differ.
In California, for example, the state rate is 7.25%, but Los Angeles County adds 2.25%, bringing the combined rate to 9.5% in most of LA. Louisiana, Tennessee, and Arkansas have the highest combined rates in the country.
States With No Sales Tax
Five states charge no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, only Alaska permits localities to impose their own sales tax — about 100 boroughs and cities do, with rates averaging around 1.8%. The others (Delaware, Montana, New Hampshire, Oregon) have no general sales tax at any level of government.
Is Sales Tax Calculated Before or After Discounts?
Sales tax is calculated on the final sale price after discounts, not the original price. If a $200 jacket is on sale for $150, you pay tax on $150. Manufacturer coupons can work differently — the rules vary by state.
Frequently Asked Questions
Which states have no sales tax?
Five states have no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, some localities in Alaska do charge local sales tax, so purchases there aren't always tax-free.
How do I calculate sales tax?
Multiply the pre-tax price by the tax rate expressed as a decimal. For example, a $100 item with a 7% tax rate: $100 × 0.07 = $7.00 tax, making the total $107.00.
What is the highest sales tax state?
California has the highest state-level sales tax rate at 7.25%. When average local taxes are added, Louisiana leads the country with combined rates above 10%; Tennessee, Arkansas, Washington, and Alabama also frequently exceed 9%.
Is sales tax calculated before or after discounts?
Sales tax is generally calculated on the final discounted price, not the original price. If an item costs $100 and has a $20 coupon, you pay tax on $80. Manufacturer coupons can work differently depending on state rules.