Highest Sales Tax by State: 2026 Complete Guide

Highest Sales Tax States

Sales tax affects the pricing strategies of small businesses that sell products, the compliance burden of online sellers, and the purchasing decisions of consumers across the country. The United States has no federal sales tax -- rates are set by states and further modified by county and city jurisdictions. This guide ranks the highest combined sales tax states in 2026, explains how combined rates are calculated, and highlights what businesses need to know about sales tax nexus and compliance.

How Sales Tax Rates Work

Sales tax in the US operates on three levels: state, county, and city/local. The combined rate is the total percentage added to a taxable sale -- state rate plus all applicable local rates.

For example, if you sell a product in a city in Tennessee:

• State rate: 7.0%
• Local rate: 2.75%
• Combined rate: 9.75%

When people discuss sales tax burdens, the combined state + local rate is the relevant figure for both consumers and businesses.

States with the Highest Combined Sales Tax (2026)

1. Louisiana -- 9.56% average combined rate

Louisiana's state rate is 4.45%, but local sales taxes are extremely high, averaging over 5% in many parishes. Louisiana allows local jurisdictions to set very high local rates, resulting in the highest average combined rate in the nation.

2. Tennessee -- 9.55% average combined rate

Tennessee's state rate of 7% is among the highest in the nation. Combined with local rates averaging 2.55%, Tennessee consistently ranks as one of the highest total sales tax states. Tennessee has no state income tax, making sales tax a primary revenue source.

3. Arkansas -- 9.46% average combined rate

Arkansas combines a 6.5% state rate with substantial local taxes to reach nearly 9.5% in many locations.

4. Washington -- 9.29% average combined rate

Washington State has no income tax and relies heavily on sales tax. The state rate is 6.5%, and local rates in Seattle and other cities push the total above 10% in many jurisdictions.

5. Alabama -- 9.29% average combined rate

Alabama's 4% state rate is relatively low, but extremely high local rates -- some exceeding 7% -- create high combined rates.

6. Oklahoma -- 8.99% average combined rate

Oklahoma charges a 4.5% state sales tax with local rates adding significantly.

7. Illinois -- 8.83% average combined rate

Illinois charges 6.25% state tax on most items, with additional local taxes pushing Chicago's rate to 10.25% and creating high averages statewide.

8. Kansas -- 8.69% average combined rate

Kansas's combined rate reflects a 6.5% state tax plus local additions.

States with No Sales Tax

Five states impose no statewide sales tax: Oregon, Montana, New Hampshire, Delaware, and Alaska (though Alaska allows local sales taxes, resulting in non-zero combined rates in some areas).

If your business is located in one of these states, you have a competitive pricing advantage on product sales. However, if you sell to customers in high-sales-tax states, you may have nexus-based obligations.

Sales Tax Nexus for Online Businesses

Following the 2018 Supreme Court ruling in South Dakota v. Wayfair, states can require online sellers to collect sales tax even without a physical presence in the state. This is called economic nexus.

Most states have economic nexus thresholds of $100,000 in sales or 200 transactions in a calendar year. If you exceed these thresholds in a state, you must register, collect, and remit that state's sales tax.

For businesses selling products online across multiple states, sales tax compliance has become significantly more complex. Many businesses use sales tax automation software (TaxJar, Avalara, Vertex) to manage multi-state compliance.

What Is Typically Taxable vs Exempt?

Sales tax rules vary by state, but common exemptions include:

• Groceries: Exempt in most states (some tax groceries at a reduced rate)
• Prescription drugs and medical devices: Exempt in most states
• Digital products and SaaS: Rules vary widely -- increasingly taxed in many states
• Services: Most services are exempt from sales tax in most states, though some states tax specific services

For service-based freelancers and B2B service providers, sales tax typically does not apply to your services -- but check your state's specific rules, as some states tax digital services, software, consulting, or other professional services.

Sales Tax Compliance for Small Businesses

If your business has sales tax obligations, key compliance steps include:

1. Register for a sales tax permit in each state where you have nexus
2. Configure your invoicing or e-commerce platform to collect the correct rate based on destination
3. File returns and remit collected taxes on the required schedule (monthly, quarterly, or annually)
4. Keep records of all taxable transactions for at least 4 years

Eonebill helps you track sales amounts and document transactions. See the freelancer payment terms guide and the invoice payment methods guide for managing client payments effectively.

State Sales Tax Rates: Complete 2026 Overview

Understanding your state's sales tax rate relative to other states helps with pricing strategy and business location decisions. Here is a broader look at where states fall:

No sales tax: Oregon, Montana, New Hampshire, Delaware (state level; Alaska allows local taxes)

Below 5% state rate: Colorado (2.9%), Alabama (4%), Georgia (4%), Hawaii (4%), Louisiana (4.45%), Missouri (4.225%), Oklahoma (4.5%), South Dakota (4.5%), Wyoming (4%)

5-6% state rate: Indiana (7%), Iowa (6%), Maine (5.5%), Maryland (6%), Michigan (6%), Minnesota (6.875%), New Mexico (5%), North Carolina (4.75%), Ohio (5.75%), Pennsylvania (6%), West Virginia (6%)

Above 6% state rate: California (7.25%), Illinois (6.25%), Indiana (7%), Kansas (6.5%), Mississippi (7%), Nevada (6.85%), New Jersey (6.625%), Rhode Island (7%), Tennessee (7%), Texas (6.25%), Utah (4.85%), Washington (6.5%)

Note: These are state base rates. Combined rates including local taxes are substantially higher in many states.

Sales Tax for Online Service Businesses

The landscape for digital services and online businesses has changed dramatically since 2018. Key developments:

Economic nexus thresholds: All 45 states with sales taxes have enacted economic nexus laws post-Wayfair. Thresholds are typically $100,000 in sales or 200 transactions. Track your sales by state to identify when you cross these thresholds.

Taxability of digital products: Software, digital downloads, SaaS products, and online services are subject to sales tax in a growing number of states. Rules vary widely -- some states tax SaaS, others do not, and the definitions are contested.

Services: Most services remain exempt from sales tax in most states, but some states have expanded their service taxability. Professional services (consulting, legal, accounting) are exempt in the large majority of states.

Marketplace facilitator responsibility: If you sell through platforms like Amazon, Etsy, Shopify, or Facebook Marketplace, these platforms are responsible for collecting and remitting sales tax in most states under marketplace facilitator laws. This substantially reduces compliance burden for sellers on these platforms.

For managing your business finances and invoicing, use Eonebill. See the freelancer tax guide for comprehensive self-employment tax guidance and the 1099 tax calculator for income tax estimation.

Why State + Local Sales Tax Rates Vary So Widely

The disparity between sales tax rates across states comes down to three factors: whether the state has a sales tax at all, how much local governments are allowed to add on top of the state rate, and which items are taxed.

No-sales-tax states: Oregon, Montana, New Hampshire, Delaware, and Alaska have no state sales tax. Alaska allows local governments to levy sales taxes, so some Alaskan municipalities have rates of 5-7% despite no state rate. These states compensate through higher income or property taxes.

High local variation: Tennessee has a 7% state rate but local add-ons push the average combined rate to 9.55%, one of the highest in the nation. California's 7.25% state rate sees combined rates above 10% in some counties. Louisiana combines a 4.45% state rate with local rates that can push combined totals above 11%.

Taxable items vary: Most states exempt groceries or tax them at a reduced rate. Many exempt prescription drugs. Some tax services (haircuts, legal fees, accounting) while others do not. A state with a 10% rate on food is more regressive than one with 10% on luxury goods only.

Sales Tax Compliance for Online Sellers

After the 2018 South Dakota v. Wayfair Supreme Court ruling, states can require out-of-state sellers to collect and remit sales tax even without a physical presence. Most states set economic nexus thresholds of $100,000 in sales or 200 transactions per year in their state. Once you cross the threshold, you must register, collect, and remit -- failure to do so creates back-tax liability plus penalties.

For freelancers selling digital products or physical goods online, use a sales tax automation tool (TaxJar, Avalara, or the built-in tools in your e-commerce platform) rather than tracking state rates manually. Use Eonebill's invoicing tools for your service invoices, and consult a CPA about whether your digital products trigger sales tax obligations in high-volume states.