States with no sales tax (and those that have the lowest)

HOW HIGH ARE SALES TAXES IN YOUR STATE? Overall, the average combined state and local sales tax is 7.49 percent. City, county and municipal rates vary. These rates are weighted by population

to compute an average local tax rate. The sales taxes in Hawaii, New Mexico and South Dakota have broad bases and include many business-to-business services. WHAT’S TAXED AND WHAT ISN’T

Although it may feel like you’re taxed on everything you buy, most states exclude specific purchases (such as groceries) from sales taxes. “That’s a huge one, because most people spend a lot

of their income on groceries,” says Janelle Fritts, a policy analyst at the Tax Foundation. While each state has its own rules on what gets taxed, tangible goods are usually taxed while

services aren’t. If a business sells something that’s supposed to be taxed, they’re the ones who typically collect tax from their customers and then send it to the government. Even then, the

rules can be quirky. Some states that exempt food from the sales tax will impose it on soda and candy. Louisiana taxes bottled water but not soda or candy. Groceries bought under the

Supplemental Nutrition Assistance Program (SNAP), often called food stamps, aren’t subject to state sales tax. All states except Illinois exempt prescription drugs from sales tax, and

Illinois taxes them at just 1 percent, compared with 6.25 percent for its statewide sales tax. Several states — Connecticut, Florida, Maryland, Minnesota, New Jersey, New York, Pennsylvania,

Texas, Vermont and Virginia — and the District of Columbia don’t charge sales taxes on nonprescription drugs. If a business sells products out of state, it only have to worry about

collecting sales tax if it sells over a certain threshold, usually around $100,000 in sales or a certain number of transactions. HOW IS SALES TAX DETERMINED WHEN SHOPPING ONLINE? When you

buy a product online, you’re supposed to pay a sales tax on it, just like when you buy things in a store, says Jared Walczak, vice president of state projects at the Tax Foundation. In the

past, many online sellers didn’t have to collect that tax. Instead, consumers were supposed to pay for it, but hardly anyone did. Following the _South Dakota v. Wayfair_ Supreme Court

decision in 2018, businesses that sell a certain amount of products within a state, even if they don’t have a physical presence, were required to collect and send in the tax for those sales.

It doesn’t matter if the business is in a state that doesn’t require a sales tax – they still have to handle it for other states where they meet a sufficient “nexus” of sales. Consumers who

live in a state without a sales tax typically won’t have to pay sales tax on most things they buy, whether from a store or online.