📅 2026 Update: Changes to State Sales Tax

Since the original article on state sales tax was published, there have been important updates regarding tax rates and regulations. Notably, North Carolina introduced a new sales and use tax rate structure that took effect on July 1, 2026. Additionally, the Tax Foundation released updated data on state and local sales tax rates shortly after.

The original article continues further down the page.

📊 New Sales and Use Tax Rates

As of October 2026, state sales tax rates vary widely. They range from 2.9% in Colorado to 7.25% in California. This shift reflects adjustments that states have made to their tax structures to meet revenue needs.

  • 🏴 North Carolina: The state implemented a new sales and use tax rate structure on July 1, 2026. Businesses must register for a sales tax permit under this new framework.

🏛️ Local Tax Changes

Some local jurisdictions have also adjusted their sales tax rates. For example, Brown County, Ohio, reduced its sales tax rate from 7.25% to 7.00%, effective October 1, 2025. Such changes can significantly impact businesses and consumers in those areas.

  • 📉 Tennessee and Louisiana: The combined state and local sales tax rates in these states are among the highest in the country, with Louisiana at 10.13% and Tennessee at 9.61%.

📝 Filing Requirements

Filing requirements for sales and use tax returns vary by state. In North Carolina, sales tax returns are due on the 20th day of the month following the reporting period. In Ohio, they are due on the 23rd day.

Businesses must keep these deadlines in mind to avoid penalties.

  • 📅 North Carolina and Ohio: Both states require businesses to file returns and register for sales tax permits if they make taxable sales.

📚 Resources for Businesses

Both the North Carolina Department of Revenue and the Ohio Department of Taxation provide resources for businesses regarding sales and use tax. These include guidelines on compliance and assistance with filing.

📌 Key Points to Remember

  • 📊 Sales tax rates vary from 2.9% to 7.25% across states.
  • 🏛️ Local tax changes can affect overall rates.
  • 📝 Filing deadlines differ by state, with North Carolina and Ohio having specific due dates.
  • 📚 Resources are available from state tax authorities for business compliance.

💡 Tips for Understanding Sales Tax

It is important to discuss your specific situation with your attorney to navigate the complexities of sales tax.

📑 Know Your State Tax Rate

Make sure you understand your state’s sales tax rate. As of October 2026, rates range from 2.9% to 7.25%. This knowledge will help you calculate the correct amount for your transactions.

🗓️ Keep Track of Deadlines

Be aware of filing deadlines for sales tax returns. In North Carolina, returns are due on the 20th of the month following the reporting period, while in Ohio, they are due on the 23rd. Missing deadlines can lead to penalties.

📜 Register for Permits

Businesses must register for a sales and use tax permit in their respective states if they make taxable sales. This requirement is essential for compliance with state laws.

📈 Check for Local Tax Changes

Stay informed about local tax changes that may impact your business. Rates can vary significantly even within a state, as seen in Brown County, Ohio, which lowered its tax rate recently.

💡 Utilize Available Resources

Take advantage of the resources offered by state tax authorities. Both North Carolina and Ohio provide assistance for businesses to help navigate sales tax laws.

🏆 Top Services for Sales Tax Preparation Ranked by User Reviews (2026)

This section lists services that can assist with tax preparation and sales tax compliance. The rankings are based on Trustpilot data as of October 2026. Scores can change, and reviews reflect customer experiences, where unhappy customers tend to leave more feedback.

🥇 1. TurboTax

TurboTax has been rated 4.0. It is known for its user-friendly interface, making online tax filing straightforward for many users. However, some reviewers note that the free version has limitations and that upselling of additional services can occur.

🥈 2. H&R Block

H&R Block holds a 4.2 star rating. The service is recognized for its tax preparation services that cater to both in-person and online users. Although it offers a wide range of options, customers mention high fees for in-person services and varying responsiveness in customer service.

🥉 3. TaxSlayer

TaxSlayer averages 3.8 stars. It is known for its affordable tax filing solutions and multiple filing options. However, some users experience limited customer support and occasional software glitches during the filing process.

4️⃣ Jackson Hewitt

Jackson Hewitt has a 3.5 rating. This service provides in-person tax preparation and year-round support. While it offers helpful services, some customers report higher service fees and inconsistent quality across different locations.

5️⃣ Liberty Tax Service

Liberty Tax Service holds a 3.2 rating. It is recognized for its franchise tax preparation and seasonal promotions. The service has been critiqued for variable service quality and aggressive marketing tactics, which may not appeal to all users.

🆓 Free Government Assistance

Both the North Carolina Department of Revenue and the Ohio Department of Taxation offer free resources for businesses regarding sales and use tax. These services provide guidance on compliance and filing, making them valuable for small business owners.

🔎 Factors to Compare When Choosing a Service

  • ⭐ Trustpilot scores and reviews to gauge customer satisfaction.
  • 💰 Pricing structures, including hidden fees.
  • 🕒 Availability of customer support and assistance.
  • 📚 Range of services offered, including in-person or online options.
  • 📈 Resources for compliance and educational materials on tax laws.

❓ Frequently Asked Questions

❓ What are the sales tax rates in different states?

Sales tax rates vary by state, ranging from 2.9% in Colorado to 7.25% in California as of October 2026. Local jurisdictions may also impose additional taxes, resulting in higher combined rates.

📅 How often do I need to file sales tax returns?

Filing frequency depends on state regulations. In North Carolina, sales tax returns are due on the 20th of the month following the reporting period. In Ohio, returns are due on the 23rd.

🏛️ Are there exemptions from sales tax?

Yes, sales tax exemptions vary by state. For instance, North Carolina exempts certain items from its general 4.75% state rate. It's essential to check state regulations for specific exemptions.

📜 How do I register for a sales tax permit?

Businesses must register for a sales and use tax permit in states where they have a tax obligation. The registration process can vary, so it's important to consult state tax authorities for guidance.

📚 Where can I find resources for sales tax compliance?

Both the North Carolina Department of Revenue and the Ohio Department of Taxation offer resources and assistance for businesses. These resources help navigate the complexities of sales tax laws.

🔍 What happens if I miss a sales tax deadline?

Missing a sales tax deadline can result in penalties and interest. Businesses are advised to file returns and make payments on time to avoid such consequences.

⚖️ Recent Court Cases Affecting Sales Tax

Recent court rulings have focused on the enforcement and application of sales tax regulations, impacting how businesses comply with tax laws.

For more recent rulings related to sales tax, please check more rulings on the news page.

End of October 2026 Update





State Sales Tax: Understanding the Basics

When we go shopping at a brick-and-mortar store or browse an online retailer, we usually know that we will be paying an extra sum at checkout. This extra amount is known as sales tax – a form of tax levied on the sale or lease of goods and services. Sales tax is one of the most significant sources of revenue for state and local governments. In 2018, state and local governments collected approximately $400 billion in sales tax, dwarfing the federal government's revenue from corporate tax. This article aims to provide an in-depth understanding of the state sales tax in the United States.

What is State Sales Tax?

State sales tax is a form of consumption tax that is collected by the state government on purchases made within its jurisdiction. Each state specifies its sales tax rate, which usually ranges from 2.9% to 9.5%, and can vary by city or county. For example, in California, the state sales tax is 7.25%, but depending on the city or county, the total tax rate can exceed 10%. In contrast, some states such as Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose state sales tax.

Sales tax is a transaction tax and is calculated as a percentage of the purchase price of the goods or services consumed. Unlike income tax, sales tax is 'regressive,' which means that it hits harder for people with lower income. For instance, a 5% sales tax on a $20 item would cost an additional $1, whereas, for a $1000 item, it would cost an extra $50. Due to this regressive nature, low-income households spend a more significant proportion of their income on goods and services, which makes sales tax an essential source of revenue for state and local governments.

Types of Sales Tax

There are two primary types of sales tax systems: origin-based and destination-based.

Origin-Based Sales Tax:

In an origin-based sales tax system, the sales tax is based on the location from where the transaction takes place. For example, if a business is in California and sells goods to a customer in New York, they will charge the California state sales tax rate, and the revenue will go to California, the state from where the transaction originates.

Destination-Based Sales Tax:

In a destination-based sales tax system, the sales tax is based on the location where the goods or services are consumed, or in other words, where the buyer is located. For example, if a business is in California and sells goods to a customer in New York, they will charge the New York state sales tax rate, and the revenue will go to New York, the state where the transaction is taking place.

As of 2021, about half of the states in the US have adopted the destination-based sales tax system, while the other half is still following the origin-based system.

Online Sales Tax

Online sales have been steadily growing over the years, and with the pandemic-induced shift to e-commerce, online sales have skyrocketed. The growth of e-commerce has presented a challenge for states that levy sales tax because many online transactions are interstate, making it difficult to identify the state that is entitled to collect the sales tax.

In 1992, the Supreme Court ruling in Quill Corp v. North Dakota restricted states from imposing sales tax on out-of-state sellers that do not have a physical presence in their state. Due to this ruling, businesses that operate exclusively online can avoid collecting or paying sales tax in states where they do not have a physical presence. This ruling gave online retailers an unfair advantage over brick-and-mortar stores, which relied heavily on sales tax revenue.

In 2018, the Supreme Court overturned the Quill ruling in South Dakota v. Wayfair, Inc. The Wayfair decision allowed states to tax internet retailers irrespective of their physical presence in the state. This ruling gave states a broader authority to levy sales tax on online transactions and paved the way for future legislation on internet sales tax.

Currently, the majority of states require online sellers to collect and remit sales tax on all orders shipped to their states. According to the National Conference of State Legislatures, as of 2021, 43 states and the District of Columbia have adopted economic nexus laws, which require remote sellers to collect and remit sales taxes based on the amount of business they do in each state.

📝 See Also

Exemptions to Sales Tax

Not all goods and services are subject to sales tax. States have different rules regarding which items are taxable and which ones are exempt. However, some items that are commonly exempt from sales tax across states include:

- Food for home consumption

- Prescription drugs and medical equipment
- Clothing and footwear, up to a certain price limit
- Goods purchased for resale
- Certain agricultural products
- Services such as healthcare, education, and legal services.

Sales tax exemptions are intended to help low-income households, incentivize certain economic activities, and reduce the tax burden on items or groups of people.

Impacts of State Sales Tax

State sales tax plays a significant role in the revenue collection of state and local governments. However, it also affects consumers and businesses in various ways.

Impact on Consumers:

As mentioned earlier, sales tax is regressive, and low-income households are the most affected. The sales tax disproportionately impacts low-income households because they spend a more significant proportion of their income on goods and services, compared to high-income households. Sales tax also affects consumers' purchasing power, as it increases the price of goods and services, leading to reduced consumption.

Impact on Businesses:

Sales tax can significantly affect businesses' profitability, as it increases the final price of goods and services, making them less competitive than those located in states with lower tax rates. Businesses are also burdened with the responsibility of collecting and remitting sales taxes, which increases their compliance costs. Moreover, the complexities of sales tax compliance increase as businesses expand across state borders, creating additional tax liabilities.

Conclusion

In conclusion, state sales tax is a form of consumption tax levied on the sale or lease of goods and services, collected by the state government, and is one of the main sources of revenue for state and local governments. Sales tax can be origin-based or destination-based, and not all goods and services are subject to sales tax. The advent of e-commerce has raised challenges for state sales tax, and the Supreme Court's Wayfair decision has provided states with broader authority to levy sales tax on online transactions.

Overall, the state sales tax has significant implications for consumers, businesses, and governments. While it generates significant revenue for state and local governments, its regressive nature disproportionately affects low-income households. Businesses are burdened with sales tax compliance, which can create an additional tax liability as they expand across state borders. It is crucial to understand the basics of the state sales tax to make informed decisions when it comes to tax planning.

Sales Tax Rates By State

(Total Including Maximum Local Surtax)

Alabama: 10%

Alaska: 7%

Arizona: 10.60%

Arkansas: 9.25%

California: 9.75%

Colorado: 8%

Connecticut: 6.35%

Delaware: 0%

Florida: 7.50%

Georgia: 8%

Hawaii: 4.71%

Idaho: 6%

Illinois: 11.50%

Indiana: 9%

Iowa: 7%

Kansas: 8.65%

Kentucky: 6%

Louisiana: 10%

Maine: 5%

Maryland: 6%

Massachusetts: 6.25%

Michigan: 6%

Minnesota: 7.88%

Mississippi: 9%

Missouri: 9.24%

Montana: 3%

Nebraska: 7%

Nevada: 8.10%

New Hampshire: 0%

New Jersey: 7%

New Mexico: 8.56%

New York: 8.88%

North Carolina: 7.25%

North Dakota: 7%

Ohio: 7.75%

Oklahoma: 8.50%

Oregon: 5%

Pennsylvania: 8%

Rhode Island: 7%

South Carolina: 9%

South Dakota: 6%

Tennessee: 9.75%

Texas: 8.25%

Utah: 8.35%

Vermont: 7%

Virginia: 5%

Washington: 9.50%

West Virginia: 6%

Wisconsin: 5.60%

Wyoming: 7%

State Sales Tax Defined:

Sales tax in the United States is government-enforced and issued levies that are typically viewed as an added cost, placed onto the price of goods or services.

The sales tax in the United States is a form of consumption tax, which is delivered as a percentage and placed on the purchase of goods, such as clothing.

The sales tax is collected by local government departments to help fund and deliver public goods to the underlying community. Each state in America contains different rules for applying a sales tax. Some state laws are more advantageous to the taxpayer for certain purchases or transactions. This policy and interpretative contrast is crucial to understand especially if the taxpayer is planning to run a business in a particular state.

Not all goods purchased are met with a sales tax. Typically items that are viewed as necessities, such as food, are not administered with an additional taxation.

The sales tax is collected by the merchant of the store or retail shop in which the goods were purchased. Typically, only consumers are charged a sales tax; the levy does not apply to resellers or manufacturers of the goods.

As is common with most local laws or taxation models, the percentage of the sales tax as well as the presence of a sales tax, will differentiate based on state interpretation. For instance, sales taxes are levied by every state except: Alaska, Delaware, Montana, New Hampshire and Oregon. Furthermore, the presence of a sales tax and the attached percentage rate may fluctuate at the county or municipal level.