Whether your business operates online or in person, you’ll face sales tax obligations in most states where you have a physical presence. “Physical presence” can mean a lot of things too: Renting an office, having inventory, or employing people who work in a certain state all apply. Even if you sell goods online, it’s nearly impossible to sell on the internet without paying state-level sales tax.
When considering where to start your business, review the state sales tax rates. These different rates can affect your product pricing and your customers’ total costs at checkout. You might find that operating in a state with no sales tax lets you offer more attractive final prices to customers compared to competitors—even if other business expenses are similar. Ecommerce businesses also have to navigate the complexities of destination-based sales taxes, which can require collecting and remitting taxes based on the customer's location.
Explore which states have the highest and lowest sales tax so you can make smart choices about where to grow your business with tax considerations in mind.
What is sales tax?
Sales tax is a consumption tax calculated as a percentage of the good or service being purchased. This is added to the purchase price that consumers pay at checkout and that business owners must collect. These taxes solely exist at the behest of state and local governments, so business owners pay these taxes to state revenue departments at the end of each quarterly reporting period. The federal government pulls in levies via income tax and other methods and doesn’t require citizens to pay sales tax.
State sales taxes help communities pay for everyday needs and services that residents use. Statewide sales tax rates vary across the country, with some states charging higher percentages while others have no state sales tax at all. Some states without a traditional sales tax may impose alternative taxes like gross receipt or excise taxes that function similarly.
On top of other state taxes, local jurisdictions add their own sales tax rates in many areas, too. The overall sales tax you’ll pay in any location typically combines the base state rate plus any local taxes, which businesses must calculate and collect for each transaction. When comparing states, researchers often look at the average local tax rate to understand the typical tax burden across different areas.
Destination-based sales tax
While businesses that operate in person typically collect sales tax based on their physical location, ecommerce businesses face additional complexities in that they may also need to tax customers based on their delivery address. This is the concept of “economic nexus,” which means that even without a physical presence in a state, a certain level of sales activity can trigger sales tax obligations for the business.
To determine these thresholds, consult each state’s Department of Revenue website, or utilize tax software that keeps a pulse on these changes. Generally, states with sales taxes (all states except Alaska, Delaware, Montana, New Hampshire, and Oregon) follow economic nexus laws. Common thresholds are $100,000 in sales or 200 individual transactions per year. Depending on the per-unit sales price of your products or the volume of products you sell, it may be too expensive to conduct business in certain states. Professional tax advisers can provide tailored guidance for your specific business operations.
Which state has the highest sales tax?
Louisiana has the highest combined sales tax, at 10.11%. The next highest sales tax states are Tennessee (9.55%), Arkansas (9.45%), and Washington (9.38%).
2025 state and local sales tax rates
Explore every state’s sales tax rate, average local rate, and the combined percentage. All the 2025 state sales tax data is from official government tax websites, and average local sales tax rates come from Tax Foundation, a nonpartisan, nonprofit organization that provides research, analysis, and data on tax policies.
Tax rates can change suddenly, so check local laws and consult a tax advisor before making big business decisions. Here’s the full breakdown of sales tax rates across all 50 US states as of 2025:
* Hawaii technically has no state sales tax. However, the state has a 4% general excise tax (GET) that functions in the same way.
** New Jersey’s average local sales tax rate appears negative because in certain Urban Enterprise Zones, the state allows retailers to charge half the normal sales tax rate, which mathematically results in a negative adjustment when calculating the statewide average.
*** New Mexico technically has no sales tax. However, it has a gross receipts tax that functions in the same way and varies by location, ranging from 4.875% to 8.9375%. Several sources cite 5.125%, which is included in the table.
State sales tax FAQ
Which state has the lowest taxes?
Delaware, Montana, New Hampshire, and Oregon have the lowest sales taxes with no state sales tax (0%) and no local sales taxes (0%), making their total sales tax burden zero.
What states have no sales tax?
Five states have no state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska does allow local jurisdictions to impose their own sales taxes.
What is a destination-based tax?
For businesses that don’t operate and collect taxes from customers at physical locations (like ecommerce businesses), they may need to tax customers based on their delivery address. Even without a physical presence in a state, a certain level of sales activity can trigger sales tax obligations for the business.
