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Do All U.S. States Have Sales Tax?
Tricia Christensen
Tricia Christensen
The majority of US states assess a sales tax for many goods and services, but some have laws that exempt certain items. For example, California doesn't tax for most food items, but snacks are taxed. The average sales tax in American states is generally between five to seven percent.
In addition to a state-assessed sales tax, many cities assess sales taxes as well. Some cities levy a one to two percent tax in addition to state taxes. Revenue from city taxes may be used to fund a variety of services including education, public work projects, or city financial obligations. City taxes, however, are generally directed at one or two defined programs.
Visitors to a state can sometimes receive an exemption status from paying that particular state's sales tax. This exemption, however, is typically not applied to luxury items like hotel or dining services. Some goods or services purchased in a state without being taxed may be taxed later by the home state. Cars, for example, that are purchased in a state without a sales tax may be taxed by the purchaser's home state.
A few states do not have a sales tax, including Alaska, Delaware, Montana, New Hampshire and Oregon. Tax laws, however, can change rapidly and dramatically.
While it may seem ideal to live in a state without sales tax, the revenues generated by them can be beneficial to the residents by funding important programs. However, opponents of this tax often argue that states without it seem to function as well as states that have it.
Some people who wish to change tax law have proposed a federal sales tax, which would replace federal income tax. People who paid more than their fair share during the year might be eligible for rebates at the end of each year. This is an unlikely scenario, especially with so many states already imposing state sales taxes.. To increase this tax by perhaps twice its current average would likely be met with a great deal of resistance.
Tricia Christensen
Tricia has a Literature degree from Sonoma State University and has been a frequent WiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.
Learn more...
Tricia Christensen
Tricia has a Literature degree from Sonoma State University and has been a frequent WiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.
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![Alaska does not have a state sales tax.]()
By: juan35mmAlaska does not have a state sales tax. -
![There is no sales tax in Oregon.]()
By: Chris BoswellThere is no sales tax in Oregon.
Discussion Comments
Whenever this topic comes up it's almost always somewhat or entirely misleading.
While there are five states that do not impose a state wide sales tax, it's fallacious to say they have no sales tax. In all of those states, individual counties and cities do impose their own sales tax.
I live in a state (Montana) that has no sales tax. It's weird when I go to another state and the sale price is $3.99, for example, but they actually want $4.50!
The extra amount of tax in Hawaii reflects the fact that sellers have to pay tax on the tax they charge customers. Example:
Product price: 100.00
Excises tax: 4.50
New total: 104.50
Excise tax on the 4.50 excise tax: 0.20
New total: 104.70
So the tax paid to the state is $4.70, which reflects an effective tax rate of 4.7 percent.
Further complicating things, sellers can add any tax amount as long as it does not exceed 4.712 percent (still talking about Oahu here). Some companies go with 4.7 percent, others with 4.71 percent and still others with 4.712 percent.
In the example above, The $1,000 product could be sold for a total of $1047.12. The state's cut would be $47.12 (4.5 percent of $1047.12).
The maximum allowable pass-on to customers 4.712 percent, as illustrated in this example: If you sell an item for $1000, you can add 4.712 percent right off the bat, bringing the total charge to $1047.12.
@ Chicada- The reason that some businesses charge more than the maximum 4% is because they are adding in the cost of paying those taxes. The state allows 0.166% beyond the general excise tax to recover accounting fees. In Oahu, there is an additional 0.50% tax added to the general excise tax. Adding the maximum 4%, the additional 0.50% and the 0.166% allowance together would allow a business to post an advertised tax of 4.66%.
@ Glasshouse- If the state sets the maximum general excise tax at 4.0%, then why do some businesses charge 4.16% or 4.66%? Is it legal for businesses to advertise a tax over 4% in Hawaii?
@ Anon47940- You make a good point about Hawaii not having a sales tax. Instead, the state has a general excise tax. Hawaii applies the tax to all businesses doing business in Hawaii.
The difference between the excise tax and state sales tax rates is who the state levies the tax on. Most states charge a sales tax on goods and services purchased. The state levies the tax directly on the consumer, and usually omits wholesale purchases, commissions, and a few other areas of business.
Hawaii levies the excise tax on all businesses, leaving it up to business owners to decide if they want to pass the expense to the consumer. The maximum excise tax on a business is 4%, but some businesses only pay 0.15% and 0.50%.
Hawaii does have a sales tax.
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