You have an e-commerce business and you are selling in the United States. Do you need to charge sales tax? Whether you need to charge or not, depends on your nexus with the United States. Please visit our blog “nexus” on this topic to learn more about it. In this article, we are going to discuss if you need to charge a sales tax, what rate you should charge.
Sales tax is an indirect tax. This tax is collected from the consumer of the goods and services by the seller and remitted to the appropriate government agency. As opposed to Canada sales tax is imposed only at the state level in the United States. There is no sales tax at the federal or national level. The collection of sales tax constitutes a major source of revenue for the state governments in the United States.
There are five states which have no sales tax with some exceptions. These states are Alaska, Delaware, Montana, New Hampshire, and Oregon.
Some local authorities in Alaska are allowed to charge some minor sales tax. Delaware imposes gross receipts tax on some businesses. As opposed to Alaska, Montana imposes resort and local option tax and is collected at the state level. New Hampshire also collects sales tax on some supplies and services at the state level. Oregon imposes sales tax only on certain goods and it can be collected by the local governments.
In general, the sales tax rates in the United States are as follows as of January 2021.
| State | State Tax Rate | Average Local Tax | Combined Rate |
| Alabama | 4.00% | 5.14% | 9.14% |
| Alaska | 0.00% | 1.43% | 1.43% |
| Arizona | 5.60% | 2.77% | 8.37% |
| Arkansas | 6.50% | 2.93% | 9.43% |
| California | 7.25% | 1.31% | 8.56% |
| Colorado | 2.90% | 4.73% | 7.63% |
| Connecticut | 6.35% | 0.00% | 6.35% |
| Delaware | 0.00% | 0.00% | 0.00% |
| Florida | 6.00% | 1.05% | 7.05% |
| Georgia | 4.00% | 3.29% | 7.29% |
| Hawaii | 4.00% | 0.41% | 4.41% |
| Idaho | 6.00% | 0.03% | 6.03% |
| Illinois | 6.25% | 2.49% | 8.74% |
| Indiana | 7.00% | 0.00% | 7.00% |
| Iowa | 6.00% | 0.82% | 6.82% |
| Kansas | 6.50% | 2.17% | 8.67% |
| Kentucky | 6.00% | 0.00% | 6.00% |
| Louisiana | 4.45% | 5.00% | 9.45% |
| Maine | 5.50% | 0.00% | 5.50% |
| Maryland | 6.00% | 0.00% | 6.00% |
| Massachusetts | 6.25% | 0.00% | 6.25% |
| Michigan | 6.00% | 0.00% | 6.00% |
| Minnesota | 6.88% | 0.55% | 7.43% |
| Mississippi | 7.00% | 0.07% | 7.07% |
| Missouri | 4.23% | 3.90% | 8.13% |
| Montana | 0.00% | 0.00% | 0.00% |
| Nebraska | 5.50% | 1.35% | 6.85% |
| Nevada | 6.85% | 1.29% | 8.14% |
| New Hampshire | 0.00% | 0.00% | 0.00% |
| New Jersey | 6.63% | -0.03% | 6.60% |
| New Mexico | 5.13% | 2.69% | 7.82% |
| New York | 4.00% | 4.49% | 8.49% |
| North Carolina | 4.75% | 2.22% | 6.97% |
| North Dakota | 5.00% | 1.85% | 6.85% |
| Ohio | 5.75% | 1.42% | 7.17% |
| Oklahoma | 4.50% | 4.42% | 8.92% |
| Oregon | 0.00% | 0.00% | 0.00% |
| Pennsylvania | 6.00% | 0.34% | 6.34% |
| Rhode Island | 7.00% | 0.00% | 7.00% |
| South Carolina | 6.00% | 1.43% | 7.43% |
| South Dakota | 4.50% | 1.90% | 6.40% |
| Tennessee | 7.00% | 2.47% | 9.47% |
| Texas | 6.25% | 1.94% | 8.19% |
| Utah | 5.95% | 0.99% | 6.94% |
| Vermont | 6.00% | 0.18% | 6.18% |
| Virginia | 5.30% | 0.35% | 5.65% |
| Washington | 6.50% | 2.67% | 9.17% |
| West Virginia | 6.00% | 0.39% | 6.39% |
| Wisconsin | 5.00% | 0.44% | 5.44% |
| Wyoming | 4.00% | 1.36% | 5.36% |
RKB Accounting has expertise in cross-border taxation and has been providing accounting and taxation services for the last fifteen years in Canada and USA. RKB services include incorporating a business on both sides of the border, bookkeeping, sales tax, payroll, and corporate and personal income tax. RKB’s expertise includes cross-border tax planning, long-term tax planning, helping business start-ups, business structure planning, and resolving complex tax matters. RKB a CPA(Delaware), CA(India), and CIA(USA) has over 25 years of experience in accounting and taxation in dealing with various countries in the world.