🇺🇸 US Tax System Overview
The United States does not have a Value Added Tax (VAT) system. Instead, it uses a sales tax system that varies by state and locality.
Key Points:
- No Federal Sales Tax: The US has no national sales tax or VAT
- State Sales Tax: 45 states + DC impose sales taxes (0% - 7.25%)
- Local Taxes: Cities and counties may add additional taxes
- Combined Rates: Total rates can exceed 10% in some areas
- Tax-Free States: Alaska, Delaware, Montana, New Hampshire, Oregon
State Sales Tax Rates (2025):
| State | Rate | State | Rate |
|---|---|---|---|
| California | 7.25% | Texas | 6.25% |
| New York | 4% | Florida | 6% |
| Illinois | 6.25% | Pennsylvania | 6% |
| Ohio | 5.75% | Georgia | 4% |
E-commerce Considerations:
Following the 2018 Wayfair decision, online sellers may need to collect sales tax in states where they have economic nexus (typically $100,000 in sales or 200 transactions).
For International Businesses: If you're selling to US customers, you may need to register for sales tax collection in states where you have nexus. Consider consulting with a US tax professional.