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- It’s not hard to calculate sales tax.
- However, it’s much more complicated to figure out the exact tax rate, since it varies by state and by purchase amount.
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When you buy something in the US, you almost always pay more than the sticker price.
That’s because of sales tax, which can vary by state or city but is generally about 4% to 8% of the item’s retail price, imposed when you check out of brick and mortar stores, online retailers, and restaurants.
Sales tax in the US is determined at the state level. There are five states that do not impose a sales tax: New Hampshire, Oregon, Montana, Alaska, and Delaware. The remaining 45 states and Washington DC all have a sales tax, which varies depending on the product and service for sale.
If you’re shopping in most US states and you want to know how much you’ll be paying in total before you check out, here are steps you can take to calculate the sales tax.
How to calculate sales tax
1. Determine whether you’ll even be paying sales tax
First of all, if you’re shopping in New Hampshire, Oregon, Montana, Alaska, or Delaware, the sticker price will be the total price. No sales tax needed.
Another way to avoid sales tax completely is to shop on a tax holiday, which individual states periodically announce to try and boost consumer spending. “Some states also allow for an exemption from sales tax for certain items. Typically, this is medicine, food, or other life essentials, but can also be items like clothing in some cases,” says Dennis Shirshikov, financial analyst at FitSmallBusiness.com.
The Federation of Tax Administrators keeps an updated calendar of which states are issuing tax holidays (and exceptions) and when, so you can plan ahead.
2. Find out how much sales tax your state charges
Because sales tax can vary by state and by item, it can be difficult to predict exactly how much you’ll pay, but not nearly as hard to get a general idea.
The Sales Tax Institute keeps an updated list of the range of sales taxes in every US state. While you can go down an online rabbit hole trying to figure out whether you’ll owe 3% or 3.5% sales tax, you might want to just use the high end of the tax range. No one is ever disappointed to pay less than they expected.
It can be much more complicated to calculate sales tax for national retailers that operate across multiple states. Amazon, for instance, clearly lists the factors that go into determining sales tax: It will be the “combined state and local rates of the address where your order is delivered to or fulfilled from.”
However, that statement is followed by a laundry list of exceptions and caveats, like whether the order is delivered to a residential or business address. Amazon does present an estimated tax amount right before you check out, and in that case, you might just want to wait for your estimated tax to be presented to you instead of trying to do the math yourself.
3. Multiply retail price by tax rate
Nailing down the rates is much more complicated than the actual math used to determine how much sales tax you’ll be paying – that’s just a simple percentage.
Let’s say you’re buying a $100 item with a sales tax of 5%.
Your math would be simply: [cost of the item] x [percentage as a decimal] = [sales tax].
That’s $100 x .05 =$5.
Since you’ve figured out the sales tax is $5, that means the total you’ll pay is $105.