What's the formula for sales tax?

Tax = price × (rate ÷ 100). Total = price + tax, or equivalently price × (1 + rate ÷ 100). To remove tax from a total, divide the total by (1 + rate ÷ 100).

Do I add state and local rates together?

Yes. The combined rate is what you charge. A 6.25% state rate plus a 2% city rate plus a 1% county rate is 9.25% combined.

Do I owe tax in states where I have no office?

Possibly. Most states have economic nexus rules — if you cross a sales threshold (commonly $100k or 200 transactions per year into the state), you owe sales tax there. Check each state's threshold.

Are services taxable?

It depends entirely on the state. Some tax most services, some tax almost none. Always check your state's specific rules before deciding what to charge.

How to Calculate Sales Tax (with examples for every situation)

Sales tax is one line of arithmetic. Where it gets confusing is the rate itself — state, county, city, special districts — and the rules about when you even have to charge it.

The two formulas you'll ever need

To add tax to a price: total = price × (1 + rate ÷ 100). A $50 item at 8.25% tax becomes $50 × 1.0825 = $54.13.

To remove tax from a total: pre-tax = total ÷ (1 + rate ÷ 100). A $54.13 receipt with 8.25% tax built in came from a $50 pre-tax price.

The rate is the hard part

The state rate is just the floor. In most states, cities, counties, and special districts add their own rates on top — usually 1–4% extra. Two stores ten miles apart can charge different sales tax. The number on your state revenue department's site is the state base rate, not what you actually charge at checkout.

For an exact rate at a specific address, look up the destination ZIP code in your state's sales tax tables, or use a sales tax automation tool if you ship across many jurisdictions.

Worked example: an Etsy seller in Texas shipping to California

Item price: $80
Buyer's address: Los Angeles, CA — combined rate ~9.5% (7.25% state + 2.25% local)
Tax: $80 × 0.095 = $7.60
Buyer pays: $87.60
You remit $7.60 to California (assuming you have nexus there).

The five no-sales-tax states

Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax. Alaska does allow local jurisdictions to charge their own. The other four are truly tax-free at the state level — but residents still owe "use tax" on big-ticket items bought from out of state.

Do I have to collect tax in other states?

Maybe. After the 2018 Wayfair ruling, states can require out-of-state sellers to collect sales tax once they cross an "economic nexus" threshold. The most common threshold is $100,000 in sales or 200 transactions per year into that state. Some states use only the dollar amount; some use either rule.

If you sell on a marketplace (Etsy, Amazon, eBay), the marketplace usually collects and remits sales tax for you in states where they're a registered "marketplace facilitator" — which is most of them. Check your seller dashboard's tax report to see what's already being handled.

What's taxable, what isn't

Most physical goods are taxable. Beyond that, it's a state-by-state mess:

Groceries: exempt or reduced rate in most states, fully taxable in a few.
Clothing: exempt below a certain price in some states (e.g. NY exempts under $110).
Digital goods (downloads, software): taxable in some states, exempt in others.
Services: wide variation. Hawaii and New Mexico tax almost everything; Massachusetts taxes very little.

Don't guess. Check your state revenue department's specific rules for your product category before you start collecting.

Common mistakes

Charging the state rate only. If your state rate is 6% but your city adds 2%, you're under-collecting 2% on every sale and will owe the difference yourself.
Forgetting to back tax out of "tax included" prices. If you advertise prices including tax, your reported revenue is the pre-tax amount, not the sticker price.
Assuming the marketplace handles everything. Marketplaces handle marketplace sales. Direct sales (your own website, in person) are still your responsibility.