General Sales Taxes

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Sales taxes are taxes on goods and services levied either as a percentage of the sales price or as a fixed amount per unit sold (e.g., per pack of cigarettes or gallon of gasoline). Sales taxes are included in the final purchase price paid by consumers.

State and local governments collect revenue from both general sales taxes, which apply to a broad range of purchases, and from selective sales taxes on specific goods or services.

How much revenue do state and local governments raise from sales taxes?

State and local governments collected a combined $545 billion in revenue from sales taxes, or 19 percent of general revenue in 2015. Sales taxes provided more revenue than property taxes, individual income taxes, or corporate income taxes.

States rely on sales tax revenue more than local governments do. State governments collected $432 billion in revenue (23 percent of state general revenue) from sales taxes in 2015; nearly two-thirds of that amount ($286 billion) came from general sales taxes and one-third ($145 billion) came from selective sales taxes. Local governments collected $114 billion (7 percent of local government general revenue) from sales taxes in 2015: $82 billion from general sales taxes and $32 billion from selective sales taxes.

State and Local Sales Tax Revenue, 2015


Total revenue ($ billions)

Percentage of general revenue

General sales tax revenue
 ($ billions)

Selective sales
tax revenue
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States and local government










Local governments





Nevada relied on sales tax revenue more than any other state in 2015; sales taxes accounted for 36 percent of the state’s combined state and local general revenues. Hawaii and Washington also collected 30 percent or more of combined state and local general revenues from sales taxes in 2015. Sales taxes provided 20 percent or more of general revenue in 14 additional states.

Alaska, Delaware, Montana, New Hampshire, and Oregon did not have a general state sales tax, but all levied selective sales taxes, and Alaska allowed local governments to levy their own general sales taxes. Among those five states, sales taxes as a share of general revenue ranged from 5 percent in Oregon to 9 percent in New Hampshire. Among the states with a general sales tax, Massachusetts (12 percent) relied least on sales tax revenue in 2015.

How much do general sales tax rates differ across states?

State general sales tax rates in 2017 range from 2.9 percent in Colorado to 7.25 percent in California. Among states with a general sales tax, Colorado is the only one with a rate below 4 percent; the rate is 4 percent in Alabama, Georgia, Hawaii, New York, and Wyoming. Alternatively, California, Indiana, Mississippi, Rhode Island, and Tennessee have rates at or above 7 percent.

Thirty-eight states (including Alaska, which has no statewide tax) allow local governments to impose their own general sales taxes in addition to any state sales tax. The maximum sales tax rates levied by local governments range from 0.5 percent in Hawaii to 8 percent in Colorado.

What purchases are subject to the general sales tax?

General sales taxes apply to the purchase of nearly all tangible goods. One notable exception is food purchased for use at home: only 13 states tax such purchases, and six of those states tax such food at a lower rate than their general sales tax rate. Five of the 13 states that tax food for use at home offer income tax credits to low-income residents to help offset the tax. In contrast, some cities, such as San Francisco and the District of Columbia, tax food bought for immediate consumption (such as food bought at a restaurant), often at a higher rate than the general sales tax rate.

Many states also exempt nonprescription drugs, textbooks, or clothing from general sales taxes. And some states have sales tax holidays, when specific purchases, such as clothes and school supplies right before the start of a new school year, are sold tax free.

The taxation of services (such as dry cleaning, carpentry, and hairdressing) is more complicated. All states tax some services, but exemptions are common. Very few states tax professional services such as doctors and lawyers. Hawaii and New Mexico are exceptions to the rule and tax nearly all services.

Do sales taxes apply to online purchases?

The treatment of online and other remote sales (e.g., catalog sales) is also complex. The Supreme Court has ruled that under the commerce clause of the US Constitution, a retailer with no physical presence in the online purchaser’s state of residence (technically called a "nexus” requirement) is not required to collect a state or local sales tax from the consumer.

However, many consumers do not realize that states levy use taxes in addition to sales taxes. Consumers are subject to use taxes on goods purchased outside their state of residence for consumption in their home state. The use tax rate is the same as the sales tax rate, but few consumers actually pay the tax. Most states with both a sales tax and an individual income tax (including California, Kentucky, Virginia, and Utah) give taxpayers a chance to pay use taxes on their income tax returns.

Although the Supreme Court (Quill Corp. v. North Dakota) ruled that states cannot require remote sellers to collect sales taxes, Congress can enact new rules. The Marketplace Fairness Act, first proposed in Congress in 2011, would allow states to require remote sellers to collect sales taxes on online purchase made by their residents. The act would require that states simplify their sales taxes to make it easier for out-of-state sellers to collect the tax. It would also exempt businesses with less than $1 million of sales. However, Congress has thus far failed to pass the legislation.

Many large retailers voluntarily collect the tax, though. Most notably, Amazon now collects taxes in every state with a general sales tax.

What taxes do states levy on alcohol, cigarettes, and gas?

Most states levy “selective” sales taxes, with different tax rates than the general sales tax, on particular goods and services. Three of the best known selective sales taxes are on alcohol, cigarettes, and motor fuels, and are in addition to any federal excise taxes (e.g., the federal gasoline tax). These taxes are also sometimes called excise taxes and, in the case of cigarettes and alcohol, “sin” taxes, because one purpose is to discourage consumption.

See our related backgrounders for more information:

Some cities (e.g., Boston, San Francisco, and the District of Columbia) also have special tax rates for certain purchases, such as restaurant meals, hotel accommodations, rental cars, and parking, that are higher than their general rates. The higher tax rates on these purchases are often intended to collect a significant share of their revenue from nonresidents who visit the city.

Further reading

Five Things You Should Know About the Online Sales Tax Bill
Howard Gleckman (2013)

Do you pay sales tax on your online holiday shopping?
Richard C. Auxier (2016)

Do Sales Tax Holidays Ever Make Sense?
Richard C. Auxier (2014)

Missouri voters were sold a bill of (taxable) goods
Richard C. Auxier (2016)


All revenue data are from the US Census Bureau’s Annual Survey of State Government Tax Collections. All dates in sections about revenue reference the fiscal year unless stated otherwise.