sales tax

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A general tax on the transacting of goods or services paid at the time of the transaction is a sales tax. A sales tax is a tax on consumption, related to value-added taxes, tariffs, and excise taxes

In the U.S., sales taxes are determined by state and local governments. The federal government could theoretically levy a nationwide federal sales tax under Article I Section 8 of the U.S. Constitution, but Congress has declined to do so. As of 2021, New Hampshire, Oregon, Montana, and Alaska levy no statewide sales tax. Generally, sales taxes range from 5% to 9%, with Tennessee, Louisiana, and Arkansas having the highest statewide sales tax. Many cities and counties levy sales taxes on top of the statewide sales tax, with New York City, for example, levying a sales tax of 4.5% on most products. While most sales taxes are indefinite and raise revenue generally, some sales taxes are temporary and are raised for specific projects. For example, Milwaukee County and four surrounding counties levied a special stadium tax of 0.1% to assist in funding the construction of Miller Park, the stadium for the Milwaukee Brewers.

[Last updated in April of 2021 by the Wex Definitions Team]