Sales tax is a type of tax that is imposed on the sale of goods and services. It is usually a percentage of the sales price, and it is collected by the seller at the time of the sale. Sales tax is one of the most important sources of revenue for state governments in the United States. In this article, we will take a look at sales tax by state, how it is calculated, and how it affects businesses and consumers.
SALES TAX BY STATE
Sales tax rates vary widely from state to state. Some states have no sales tax at all, while others have rates that are higher than 10%. According to the Tax Foundation, as of January 1, 2021, the five states with the highest combined state and local sales tax rates were:
On the other hand, the five states with the lowest combined state and local sales tax rates were:
It is important to note that these rates are subject to change and may vary within each state depending on local sales tax rates.
HOW SALES TAX IS CALCULATED
Sales tax is calculated as a percentage of the sales price of goods or services. The sales tax rate varies depending on the state and local tax laws. For example, if the sales tax rate in a particular state is 6% and a retailer sells a product for $100, the sales tax would be $6, making the total cost of the product $106.
In some states, there are exemptions or reduced rates for certain goods and services. For example, in many states, food and prescription drugs are exempt from sales tax. In other states, there may be a reduced rate for clothing or other items.
BUSINESSES AND SALES TAX
Businesses that sell goods or services must collect sales tax from their customers and remit it to the state. This requires businesses to have a sales tax permit from the state in which they are operating. The process of obtaining a sales tax permit varies from state to state.