The headline answer
The United States is one of the few major economies that does not operate a Value Added Tax. There is no federal VAT, no federal GST, and no federal sales tax. Consumption taxation in the US is handled at the state and local level through retail sales and use taxes.
For non-US businesses used to a single national VAT rate, this is the most important thing to understand: every state — and often every county or city within a state — sets its own rules. A short trip across a state line can change the rate, the list of taxable items, and even the registration thresholds.
How state sales tax differs from VAT
VAT is collected at every step of the supply chain, with businesses recovering the VAT they pay on inputs. Sales tax in the US is collected only at the final retail sale to a consumer. The mechanics behind this difference matter:
- One stage, not many. A wholesaler selling to a retailer typically does not charge sales tax — the retailer presents a resale certificate. Sales tax is charged when the retailer sells to the end customer.
- No input recovery. Because sales tax is only collected at the final stage, there is no equivalent of input-VAT recovery on a US sales-tax return.
- Use tax fills the gap. When a consumer buys a taxable item from a seller who did not collect sales tax (often a remote seller), the buyer is technically liable for "use tax" at the same rate — though enforcement on individual consumers is uneven.
- Different items are taxable. Most US states exempt staple groceries and prescription drugs. Many also exempt clothing below a certain price, services, or digital goods. The exempt list varies by state.
Who collects what
- Federal government: No general consumption tax. Federal excise taxes apply to specific products (motor fuel, alcohol, tobacco, airline tickets) but these are not retail sales taxes.
- States: 45 states plus the District of Columbia impose a state-level sales tax on most retail sales of tangible goods.
- Local jurisdictions: Many counties, cities, and special districts add their own sales tax on top of the state rate. Combined rates in some metro areas exceed 9–10%.
- States with no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Note that some Alaskan local jurisdictions charge a local sales tax even though the state itself does not.
Selected state base rates
The figures below are statewide base rates and do not include county, city, or special-district add-ons. Always confirm the destination-specific rate with the state's department of revenue before invoicing or pricing.
| State | Base rate | State | Base rate |
|---|---|---|---|
| California | 7.25% | Texas | 6.25% |
| New York | 4.00% | Florida | 6.00% |
| Illinois | 6.25% | Pennsylvania | 6.00% |
| Ohio | 5.75% | Georgia | 4.00% |
| Washington | 6.50% | Massachusetts | 6.25% |
| Tennessee | 7.00% | Indiana | 7.00% |
Selling to US customers from outside the country
Following the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require remote sellers to collect sales tax even without a physical presence in the state. Most states adopted "economic nexus" thresholds — typically a dollar value of sales into the state per year, sometimes combined with a transaction count.
- The most common thresholds are around $100,000 of sales or 200 separate transactions per year, but the exact rule varies state by state.
- Once you exceed a state's threshold, you generally need to register for sales tax there, collect it on taxable sales, file periodic returns, and remit what you collect.
- "Marketplace facilitator" laws shift the obligation to platforms (Amazon, eBay, Etsy and similar) for sales they facilitate, so individual sellers on those platforms often do not need to register separately for the same transactions.
If you ship physical goods, customs duties on import are a separate, federal matter and unrelated to state sales tax.
How this differs from a VAT-style country
If you usually deal with VAT or GST regimes, the practical contrasts look like this:
- There is no equivalent of "VAT inclusive" pricing in most of the US. Quoted prices are typically before sales tax, with tax added at checkout.
- There is no national VAT number. Sales-tax registrations are state-by-state and have separate identifiers.
- There is no equivalent of an OSS or IOSS one-stop filing for the US — each state's return is filed separately, although the Streamlined Sales Tax (SST) project simplifies registration in participating states.
- Reverse-charge rules do not exist for US sales tax. The closest concept is "use tax" self-assessed by the buyer.
For a deeper comparison of the two systems, see our explainer on VAT vs GST vs sales tax.
Common questions
Is there any chance the US will introduce a federal VAT?
VAT proposals have been discussed periodically in US tax-policy circles for decades, but no federal VAT has been enacted and none is currently scheduled. Anyone planning a US-bound supply chain should design around state sales tax, not a hypothetical federal VAT.
Do I charge sales tax to a foreign buyer who ships abroad?
Generally no — exports out of the US are not subject to state sales tax, although the rules and required documentation vary by state.
Are services taxable?
It depends on the state and the service. Some states tax most services; others tax very few. Digital goods and SaaS are taxable in some states and not others. Always check the destination state's published list.
Last reviewed on April 27, 2026.