VAT, Sales Tax, and Consumption Tax in the United States

The United States is one of the few developed countries without a federal Value Added Tax (VAT). Instead, state and local governments impose retail sales taxes at rates ranging from 0% to 10.25%. This guide covers sales tax rates, exemptions, use tax, and compliance requirements.

No Federal VAT

The United States does not impose a federal VAT or general sales tax. There has been discussion of introducing a federal VAT, but no legislation has been enacted. Instead, consumption taxes are imposed at the state and local level.

State Sales Tax

State sales tax rates range from 0% to 7.25%:

Local Sales Tax

Many cities, counties, and special districts impose additional local sales taxes. Combined state and local rates can reach:

Sales Tax Exemptions

Use Tax

Use tax is a companion to sales tax, imposed on goods purchased out-of-state for use within a state. Individuals and businesses are required to self-assess use tax on taxable items where sales tax was not collected. Use tax rates are the same as the corresponding sales tax rate.

Sales Tax Compliance for Businesses

Excise Taxes

In addition to sales tax, the federal government and states impose excise taxes on specific goods: