How to calculate US sales tax on a sale

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Sales tax equals the taxable sale price multiplied by the combined tax rate that applies to that sale. The applicable place can be the seller’s location, the delivery address, or another location set by a state rule.

Indiana has a 7 percent sales tax throughout the state, and county Food and Beverage Tax can also apply in certain areas. Texas, California, and Tennessee each combine state tax with local taxes under their own rules.

State	State rate	Local rate rule	Combined rate example
Indiana	7 percent	Food and Beverage Tax may apply in certain areas	7 percent, plus applicable FAB
Texas	6.25 percent	All local layers together cannot exceed 2 percent	Maximum 8.25 percent
California	7.25 percent	A district rate can be 0.10 to 2.00 percent, and several district taxes can apply at one address	Los Angeles city: 10.25 percent
Tennessee	7 percent general rate, 4 percent for food and food ingredients	Local rate cannot exceed 2.75 percent	State rate plus local rate

Start with the taxable price and combined rate

Use this calculation: tax equals taxable price multiplied by the combined rate. The total charged to the buyer equals the price multiplied by one plus the combined rate.

For example, assume a taxable $100 sale has a combined rate of 8 percent. The tax is $100 multiplied by 0.08, which equals $8.00, and the total charge is $108.00.

Where a total already includes tax, divide the total by one plus the combined rate to find the price before tax. Subtract that pre-tax price from the total to find the tax portion.

The Streamlined Sales Tax Governing Board’s guidance says to keep the tax calculation to three decimal places. If the third decimal is 5 or more, raise the cents amount by one cent; if it is 4 or less, remove that third decimal.

For example, tax of $6.245 becomes $6.25. Tax of $6.244 becomes $6.24.

A cash payment may be rounded to the nearest nickel where penny shortages prevent exact change. That cash-total adjustment does not alter the tax calculation.

Choose the location before applying local tax

Under the Streamlined Sales and Use Tax Agreement, a sale belongs to the seller’s site when the buyer takes possession there. A sale received somewhere else is sourced to the place where the buyer, or a recipient chosen by the buyer, receives the product.

A member state with local tax jurisdictions can choose origin sourcing in certain cases. That approach can use the seller’s order-receipt location when the agreement’s conditions are met.

Texas local boundaries do not track ZIP codes, and the Texas Comptroller of Public Accounts directs sellers to the Sales Tax Rate Locator for an address-based result.

California also directs sellers who are unsure about district taxes to use its address lookup. A business should identify the applicable place first, then add the rates that apply there.

Businesses selling into more than one state also need to know whether they must collect tax in each state. Many states have economic nexus rules that require remote sellers to collect and remit after they exceed specified thresholds. See when a business must charge sales tax for the basic nexus question.

Indiana uses a statewide sales tax rate

Indiana’s sales tax rate is 7 percent statewide. The Indiana Department of Revenue’s ST 107 “INDIANA 7% SALES TAX CHART” says that a purchase containing several items is taxed on the combined purchase amount.

For a taxable combined purchase of $80, multiply $80 by 0.07. The tax is $5.60, making the amount charged $85.60.

Some Indiana food and beverage sellers must collect a separate Food and Beverage Tax, or FAB, as well as sales tax. The Indiana Department of Revenue gives Allen County as an area with a 1 percent FAB, while its table lists Marion County at 2 percent.

That means an eligible $100 food and beverage sale in an area with a 1 percent FAB would have a combined 8 percent rate. The sales tax is $7.00, the FAB is $1.00, and the total tax is $8.00.

FAB is distinct from County Innkeeper’s Tax, or CIT, and Local Income Tax, or LIT. Not every county has CIT or FAB.

Texas limits the combined local rate

Texas applies a 6.25 percent state sales or use tax before the relevant local amount is added. The combined local amount has a 2 percent ceiling, so the total rate cannot rise above 8.25 percent.

A city, transit authority, county, or special purpose district may impose Texas local tax. Those local layers together remain subject to the 2 percent limit.

A $100 taxable sale at the maximum Texas rate produces $8.25 of tax. The buyer pays $108.25.

An in-person order placed at a Texas business location is taxed at that location, even if fulfillment happens elsewhere.

During the court challenge, Texas has accepted a temporary injunction that stops enforcement of its rule for orders not received by sales personnel. For an order not placed in person but filled at the seller’s Texas business location, local sales tax follows the location that filled the order.

If the order is filled from a Texas warehouse that is not a place of business, tax follows the delivery location. Shipping can add local use tax when the delivery jurisdiction has a higher local rate. See how US sales tax works for businesses for more on sales and use tax.

Texas says the same tax type is not collected twice, and all local tax still stays within the 2 percent limit. Texas lists 1.75 percent as the current single local use tax rate, which it publishes in the Texas Register by January 1 each year.

Remote sellers may use that rate instead of calculating all local tax at the delivery address. Added to the 6.25 percent state rate, that produces an 8 percent combined rate; Texas businesses cannot use that remote-seller option.

California adds district taxes by address

California sets its statewide sales and use tax at 7.25 percent. District taxes range from 0.10 to 2.00 percent, and more than one district tax can apply in the same area.

For a sale delivered in a special tax district, the California Department of Tax and Fee Administration says to add the statewide rate and district tax rate or rates. Its rate table lists Los Angeles city at 10.25 percent.

On a $100 taxable sale at 10.25 percent, tax is $10.25 and the total is $110.25. The CDTFA rate table effective October 1, 2026 lists Lancaster and Palmdale at 11.75 percent, while the lowest listed rate is the 7.25 percent statewide base.

A seller not engaged in business in a district does not have to collect that district’s tax and can use the 7.25 percent statewide rate.

Tennessee has special treatment for food and single items

Tennessee applies a 7 percent state sales tax rate to general sales. For food and food ingredients, the state portion is 4 percent before the applicable local amount is added. Prepared food is subject to the 7 percent general state amount, together with the local rate.

Sales and Use Notice #17-21 treats seller-prepared sandwiches and coffee or tea as prepared food.

Tennessee local tax cannot exceed 2.75 percent and must move in 0.25 percent increments. In most local jurisdictions, local tax is charged only on up to $1,600 of one item’s price.

The local cap applies item by item, not to a multi-item invoice total.

Common questions

Do I add state and local sales tax together?

For Indiana, Texas, California, and Tennessee, add the state rate and applicable local rates, then multiply by the taxable price. Tennessee’s single-article rules are an exception because local tax is limited to the first $1,600 in most jurisdictions and the State Single Article Tax applies to the portion from $1,600 through $3,200.

How does Indiana calculate tax on several items?

Indiana’s ST 107 chart directs sellers to calculate tax on the combined purchase total when several items are bought together.

Does delivery location always determine the rate?

No. When goods are not collected at the seller’s site, the Streamlined agreement assigns the sale to the place where the buyer or buyer-selected recipient gets them. Texas uses more detailed rules based on how and where an order is received and filled.

How do I file tax after calculating it?

A Texas seller reports state and local sales and use tax through the Texas Sales and Use Tax Return. For general filing steps, see how a US small business registers for and files sales tax.

Sources

• Streamlined Sales Tax Governing Board: Penny Elimination
• Streamlined Sales Tax Governing Board: Streamlined Sales and Use Tax Agreement
• Indiana Department of Revenue: County Tax Rates:
• Indiana Department of Revenue: Indiana 7% Sales Tax Chart (ST 107)
• Indiana Department of Revenue: Food & Beverage Tax
• Texas Comptroller of Public Accounts: Local Sales and Use Tax Collection - A Guide for Sellers
• Texas Comptroller of Public Accounts: Remote Sellers
• California Department of Tax and Fee Administration: California City & County Sales & Use Tax Rate Information
• California Department of Tax and Fee Administration: California City and County Sales and Use Tax Rates - Cities, Counties and Tax Rates - California Department of Tax and Fee Administration
• California Department of Tax and Fee Administration: Basic Rules - Publication 105, District Taxes and Sales Delivered in California
• Tennessee Department of Revenue: Sales and Use Tax
• Tennessee Department of Revenue: Sales and Use Notice
• Tennessee Department of Revenue: Local Sales Tax
• Tennessee Department of Revenue: Single Article Special Tax Rates
• Streamlined Sales Tax Governing Board: Remote Seller State Guidance