What Is Sales Tax?

Sales tax is a tax imposed by most states (and many localities) on retail purchases of goods and some services. The seller collects it at the point of sale and remits it to the state. Rates vary widely — from 0% (in states with no sales tax) to over 10% when state and local rates are combined. Many states exempt groceries, prescription drugs, and clothing from sales tax. Businesses that sell products must collect and remit sales tax in states where they have "nexus" (a connection, like employees or a warehouse).