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  Mike Todd

Guide to Sales Tax

What you see isn't what you pay
Almost all US stores display their prices before the addition of sales tax. For the British, who are used to having VAT included
in the price (and having stores that don't include the VAT must display a prominent notice to that effect) it can be the source of some confusion.

It doesn't help that sales tax consists of different components, representing the state tax plus county and city taxes, and so knowing exactly what price you'll be charged can sometimes be very difficult.

To add to the confusion, different states have different rules on what is exempt from sales tax, and if you buy mail order goods in the US there are complicated rules about whether or not you have to include sales tax (it depends on the states and the company involved). One principle is that if the company you're buying from has a presence in the state you're ordering from, it will attract sales tax - otherwise it won't.

The table below lists the states and their basic rate of sales tax. This is as accurate as I can get (January 2007), but bear in mind that tax rates may have changed since it was prepared. City and county taxes aren't included, but can vary from 0% up to an additional 5% or so, and states vary in what categories of items are exempt or are subject to special tax rates.

Alabama   4%
Alaska   0%
Arizona   5,6%
Arkansas   6%
California   6.25%
Colorado   2.9%
Connecticut   6%
Delaware   0%
DC   5.75%
Florida   6%
Georgia   4%
Hawaii   4%
Idaho   6%
Illinois   6.25%
Indiana   6%
Iowa   5%
Kansas   5.3%
Kentucky   6%
Louisiana   4%
Maine   5%
Maryland   5%
Massachusetts   5%
Michigan   6%
Minnesota   6.5%
Mississippi   7%
Missouri   4.225%
Montana   0%
Nebraska   5.5%
Nevada   6.5%
N Hampshire   0%
New Jersey   3.5%
New Mexico   5%
New York   4%
N Carolina   4.25%
N Dakota   5%
Ohio   5.5%
Oklahoma   4.5%
Oregon   0%
Pennsylvania   6%
Rhode Island   7%
S Carolina   5%
S Dakota   4%
Tennessee   7%
Texas   6.25%
Utah   4.75%
Vermont   6%
Virginia   4%
Washington   6.5%
W Virginia   6%
Wisconsin   5%
Wyoming   4%

If you want more details, the ext-link indicatorSales Tax Clearinghouse has a Web site giving much more information (down to county level if you need it). Although you can have a look around, there is limited access to detailed data without a subscription. However, the site does provide links to the state Web sites where you may find additional information..

Even if you shop at two nearby stores, you could find the tax rate is different as I did in a small town in California. In one store I paid 6.25% tax ... but a couple of stores down the street it was 6.5%. The second store was in a different district, and an additional 0.25% school-board levy was charged.

Buying goods over the Internet is another can of worms. In all states where sales tax is applied, any goods bought over the Internet are subject to sales tax ... except if those "goods" are downloaded software or information. Some states charge sales tax on both items, some on neither, and some charge it only on software but not on information.

And if you're buying Internet access in some states you will be charged sales tax, in others you won't. In Nebraska you'll get charged tax on any setting up costs if software is provided, in Ohio you'll only pay tax if you're a commercial user, and if you're in Texas, the first $25 of any costs in each month will be tax exempt.

Goods for export
It is possible to buy goods "tax free for export", as the store signs will declare. My understanding of this is that you can either have the goods shipped, or you will be given a tax form which must be presented at the tax office at the airport on departure, and you'll get the tax refunded.

But there are two conditions. The first is that you can only do this at a store operating the scheme, and the second is that you can only do it if you're leaving from an International airport in the same state that you made the purchase.