The Basic Sales Tax Formula
Sales tax is a percentage of the taxable price. To find it, turn the rate into a decimal by dividing by 100, then multiply:
Sales tax = Price × Rate
Total = Price × (1 + Rate)
A $250 purchase at 7% has $250 × 0.07 = $17.50 of tax, for a total of $267.50. If you only need the total, multiply by 1.07 in one step. This works for any rate: 8.25% becomes 1.0825, 6.875% becomes 1.06875.
Retailers calculate tax on the whole taxable subtotal and then round to the cent, so a receipt can differ from item-by-item math by a penny. That is normal.
Working Backwards: Removing Tax From a Total
The most common mistake is trying to remove tax by subtracting the rate from the total. If you paid $107 including 7% tax and you take 7% off $107, you get $99.51, but the real pre-tax price was $100. The tax was charged on the smaller pre-tax amount, so you have to divide:
Price before tax = Total ÷ (1 + Rate)
Tax included = Total − Price before tax
For a $107 receipt at 7%: $107 ÷ 1.07 = $100.00, and the tax was $7.00. This reverse calculation is what you need for expense reports, reimbursements, bookkeeping and comparing prices between stores that show tax differently.
Your Real Rate Is State Plus Local
In most of the country the rate on your receipt is a stack of several taxes: the state rate, plus county, city and sometimes special-district rates for things like transit. That is why two stores a few miles apart can charge different amounts.
The Tax Foundation's midyear 2026 report shows how much local taxes matter. California has the highest statewide rate at 7.25%, but once population-weighted local rates are added, Louisiana had the highest combined average at 10.13% as of July 1, 2026, followed by Tennessee at 9.61% and Washington at 9.57%.
| State | State rate | Avg. local | Combined avg. |
|---|---|---|---|
| Louisiana | 5.00% | 5.13% | 10.13% |
| Tennessee | 7.00% | 2.61% | 9.61% |
| California | 7.25% | 1.78% | 9.03% |
| Texas | 6.25% | 1.95% | 8.20% |
| New York | 4.00% | 4.54% | 8.54% |
| Florida | 6.00% | 0.98% | 6.98% |
The combined figure is an average across the state, not your rate. Your exact rate depends on the delivery or store address. Most state revenue departments offer a free address lookup, and the rate printed on a recent receipt from the same store is also reliable. Our sales tax calculator lists every state's base rate from the same report and lets you add your local rate on top.
Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska still lets cities and boroughs charge local sales tax, so "no state tax" does not always mean no tax.
Worked Example: A Shopping Trip in Texas
Step by step
- Find the rate. Texas charges 6.25% statewide, and local jurisdictions can add up to 2%. In a city charging the full 2%, the combined rate is 8.25%.
- Total the taxable items. A $180 jacket and a $45 pair of shoes make a $225 taxable subtotal.
- Multiply. $225 × 0.0825 = $18.5625, which rounds to $18.56.
- Add. $225 + $18.56 = $243.56 at the register.
- Check in reverse. $243.56 ÷ 1.0825 = $225.00, confirming the pre-tax subtotal.
What Is (and Isn't) Taxed
Sales tax applies to the taxable price, and every state decides what is taxable. Common differences include:
- Groceries: many states exempt food bought for home consumption or tax it at a lower rate, while prepared food and restaurant meals are usually fully taxed.
- Prescription drugs are exempt in nearly every state that has a sales tax.
- Clothing: a few states exempt clothing entirely or below a price threshold, and several run sales tax holidays before the school year.
- Services: most states tax goods more broadly than services. Hawaii, New Mexico and South Dakota tax a wide range of services, which the Tax Foundation notes in its rate tables.
- Shipping and delivery may be taxable or exempt depending on the state and on whether the charge is listed separately.
When in doubt, the state revenue department's publications are the authority. The Federation of Tax Administrators keeps a directory of every state agency.
Sales Tax on a Car With a Trade-In
Vehicle purchases are where sales tax gets expensive, and the trade-in rule can save hundreds of dollars. In most states the taxable amount is the price minus the value of your trade-in. On a $35,000 car with an $8,000 trade-in at 7%, you pay tax on $27,000, which is $1,890, rather than $2,450 on the full price. A handful of states, including California, do not give this credit and tax the full price. Dealer documentation fees may also be taxable. The auto loan calculator lets you choose either rule and shows how tax flows into your payment.
Online Purchases and Use Tax
Since the Supreme Court's 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax even without a physical presence, as long as the seller does enough business in the state. Every state with a sales tax now has rules like this, so most online orders show tax at checkout.
When a seller does not collect tax, most states still expect you to pay use tax at the same rate, often through a line on your state income tax return. This mostly matters for large purchases from small or foreign sellers.
Tips for Businesses
- Charge the right rate for the right address. For shipped orders, most states use the destination rate, so one store may collect dozens of rates.
- Keep the pre-tax price and the tax separate in your records. Sales tax you collect is the state's money, not revenue.
- Get exemption certificates from resellers and tax-exempt buyers and keep them on file.
- Price tax-included carefully. If you want a $20 sign price to include 8% tax, the pre-tax price is $20 ÷ 1.08 = $18.52, not $18.40.
Quick Reference
| You know | You want | Do this |
|---|---|---|
| Price and rate | Tax | Price × rate |
| Price and rate | Total | Price × (1 + rate) |
| Total and rate | Pre-tax price | Total ÷ (1 + rate) |
| Price and total | Rate | (Total ÷ price) − 1 |
The last row is handy when a receipt doesn't show the rate: a $54.00 item that rang up at $58.32 was taxed at ($58.32 ÷ $54.00) − 1 = 8%.
Frequently Asked Questions
How do I calculate sales tax on a purchase?
Convert the rate to a decimal and multiply by the price. At 6.5%, a $40 item has $40 × 0.065 = $2.60 of tax, so you pay $42.60.
How do I find the price before tax?
Divide the total by 1 plus the rate. A $42.60 total at 6.5% is $42.60 ÷ 1.065 = $40.00.
Which states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax. Alaska allows local sales taxes, so some Alaska purchases are still taxed.
Is sales tax charged on shipping?
It depends on the state. Some tax delivery charges when the item itself is taxable, others exempt separately stated shipping. Check your state revenue department's guidance.
Sources
- Tax Foundation, "State and Local Sales Tax Rates, Midyear 2026" (taxfoundation.org), rates as of July 1, 2026.
- South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), Supreme Court of the United States.
- Federation of Tax Administrators, state revenue department directory (taxadmin.org).
This guide is for education. Figures are current as of October 2026; for tax, lending or legal decisions, check the rules that apply to you.