Understanding Sales Tax
Sales tax is a consumption tax imposed by the government on the sale of goods and services. In the United States, it's not federal; it's determined at the state and local levels.
State vs. Local Rates
The total tax you pay at the register is often a combination of:
1. State Tax Rate: A baseline percentage set by the state (e.g., Texas is 6.25%).
2. City/County Tax Rate: Additional percentages added by local municipalities
(e.g., Houston adds 2%, making the total 8.25%).
Tax-Exempt Items
Not everything is taxed. Many states exempt necessities to reduce the burden on low-income residents. Common exemptions include:
- Groceries: Unprepared food items are often tax-free.
- Prescription Drugs: Medicine prescribed by a doctor.
- Clothing: Some states (like PA or NJ) exempt clothes, or have "tax holidays" for back-to-school shopping.