How sales tax is worked out
Sales tax = price × rate. A 100 item at 8.25% has 8.25 tax and costs 108.25. To find the price before tax from a total, divide the total by 1 plus the rate: 108.25 ÷ 1.0825 = 100.
Which rate do I use?
US sales tax is set by each state, and many cities and counties add their own. State base rates include California 7.25%, Texas 6.25%, Florida 6% and New York 4%; the rate a buyer actually pays is often higher once local taxes are added. Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Check your state's tax website for the exact combined rate at your address.
Many services are not subject to sales tax, depending on the state. When in doubt, ask your accountant.
Questions
Is sales tax the same everywhere in the US?
No. Each state sets its own rate, and local taxes are often added on top.
Do I charge sales tax on services?
It depends on the state and the service. Many states don't tax most services, but some do.
How do I show sales tax on an invoice?
Enter the rate in the tax box of the invoice generator. It shows the subtotal, the sales tax and the total.
Which states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, though some Alaska towns charge local tax.