A sales tax is a tax levied on commercial transactions, usually retail sales. It is calculated by taking the sale cost and adding a set percentage to each transaction to be paid to the state in tax. In many countries, such as Canada and most European countries, this tax is assessed by the national government and usually referred to as the VAT or GST.

In the US, the sales tax is assessed by the individual states, or sometimes by smaller local jurisdictions. Alan Keyes, 2000 Republican presidential candidate, proposed replacing the national income tax with a national sales tax with exemptions for basic necessities such as food and clothing.

The sales tax is often criticised as being regressive, as poor people spend a larger portion of their income on taxable goods. The exepmtions for basic necessities such as groceries, drugs, and/or clothing found in many states are intended to counteract the regressive nature of the tax.

Alaska, Delaware, Montana, New Hampshire, and Oregon have no sales tax.

Residents living on the borders of states can sometimes take advantage of different tax rates, such as in Vancouver, WA, a suburb of Portland, OR: Many residents live there to take advantage of no income tax and lower property taxes, then cross the river to Oregon to purchase goods without tax.

Sales Tax percentage rates for U.S. States:1

Alabama              4
Alaska               -
Arizona              5
Arkansas             5.125
California           7
Colorado             2.9
Connecticut          2.9
Delaware             -
Florida              6
Georgia              4
Hawaii               4
Idaho                5
Illinois             6.25 (1% for food and drugs)
Indiana              5
Iowa                 5
Kansas               4.9
Kentucky             6
Louisiana            4
Maine                5
Maryland             5
Massachusetts        5
Minnesota            6.5
Mississippi          7
Missouri             4.225
Montana              -
Nebraska             5
Nevada               6.5
New Hampshire        -
New Jersey           6
New Mexico           5
New York             4
North Carolina       4
North Dakota         5
Ohio                 5
Oklahoma             4.5
Oregon               -
Pennsylvania         6
Rhode Island         7
South Carolina       5
South Dakota         4
Tennessee            6
Texas                6.25
Utah                 4.75
Vermont              5
Virginia             4.5 (4% for food)
Washington           6.5
West Virginia        6
Wisconsin            5
Wyoming              4

Dist. of Columbia    5.75


(1) http://www.taxadmin.org/fta/rate/sales.html

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