Paste your Google Webmaster Tools verification code here
Sales Tax 101

Sales Tax by State: Can retailers include sales tax in the price of the item?

by Jennifer Dunn

Here in the US, we’ve grown accustomed to paying $23.77 or $5.11 on a purchase. That’s because, in general, when you make a purchase in the US you pay for the price of the item plus the sales tax rate.

However, some vendors have good reason to include the sales tax in the posted price of the item. Perhaps you’ve set up a booth at a craft show and want to keep your prices at a nice and round $20 or $100 so your customers can easily pay cash. Or you own a vending machine. I’ve never seen a vending machine that requires sales tax! (Though most items sold in a vending machine are subject to tax the same as if they were being sold in a store, but that’s the subject of a blog post for another day.)

From time to time here at TaxJar, customers ask us if they are allowed to include sales tax in the posted price of an item.

Let’s break it down.

The Pros of Tax Included Pricing

Tax included pricing is generally for your customers’ benefit. If you include tax in the price of an item, what they see is what they pay. This can be especially useful in a cash situation such as a trade show or art fair. Perhaps your child’s sports team is selling candy bars as a fundraiser. It’s a whole lot easier to ask a captive audience of friends and family to pony up a five dollar bill than it is to ask them to pony up $5.11.

But as customer-friendly as tax included pricing is, it has its downsides…

The Cons of Tax Included Pricing

First and most importantly, some states do not allow retailers to include sales tax in the price of the item. Keep reading for a list of what each state allows when it comes to tax included pricing.

But if you do operate in a state that allows tax included pricing, you have other issues. Even if you, the retailer, include the sales tax in the price of the item, when it comes time to file your sales tax return you are still required to break out exactly how much sales tax you collected on each transaction.

If you only sell one item for one price, then chances are you know how much in sales tax you’re collecting. But who in this day and age doesn’t sell a varied product mix?

And tax included pricing gets even more tricky for retailers, like eCommerce businesses, who sell to customers all over the country and collect varying rates.

Let’s look at an example.

Say you list a table lamp on your website at $100, tax included. Well, if you sell that table lamp to a buyer in Connecticut (where the tax rate is a flat 6.35%) then you’re required to remit $6.35 in sales tax to the state of Connecticut on that transaction.

But if you sell the same table lamp to a buyer in Aberdeen, Washington, where the sales tax rate is 9.08%, then you’d be required to remit $9.08 in sales tax to the state of Washington.

As you can see, you are cutting into your profit margin by including tax in your pricing.

Further, US customers are accustomed to paying their local sales tax rates. We’re so accustomed to paying odd amounts in sales tax that paying a flat rate might surprise us or leave us a little confused.

Need help with tax included sales tax filing?

Have you already included sales tax in the price of your items? That can make filing sales tax returns challenging, but TaxJar has your back. With our Expected Sales Tax Due report, we show you how much sales tax you should have collected on each transaction. We also show you how to fill out your state tax returns correctly, or even AutoFile your tax returns for you using the correct rates you would have collected had you not included tax in the pricing.

Ready to automate sales tax? To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.

Which States Allow Tax Included Pricing

We contacted every state to determine whether or not they allow retailers to include sales tax on the price of the item. Here’s what they said.

Note: As always, we recommend checking with the state or a vetted sales tax expert before making a change to how you collect sales tax. In this case, we especially recommend getting the green light from the states listed here that do not have explicit laws or sales tax regulations regarding tax included pricing. We’ve done our best to ensure the accuracy of the information below at the time of posting, but sales tax rules regulations are always changing.

State

Sales Tax Allowed in Price?

Notes & Sources

Alabama

No; Exceptions include vendors of Amusement or Entertainment, and they must publicly post that sales tax is included

Rule #810-6-1-.125

Alaska

No statewide sales tax rate

AK has no statewide sales tax; check with local area if your local area has sales tax

Arizona

Yes; Can include sales tax in price as long as you keep records to track your sales tax & use correct deduction code when remitting your sales tax

No stated law per AZ Department of Revenue representative via phone

Arkansas

Yes; Vendor must clearly state that all taxes are included in sales price

26-53-124 – Collection of tax by vendor

California

Yes, but you must provide a sign clearly stating this

Source

Colorado

No

Colorado law expressly states that a vendor must show the buyer how much they are paying in sales tax

Connecticut

Yes; Sales receipt must be marked tax included

Source

Florida

No

Florida Statute 212.07

Georgia

No

O.C.G.A.Statute 48-8-2 (34)

Idaho

No

Source

Illinois

No; Vendors must state tax separately from item

Act 35 ILCS 120-1

Indiana

No, except on fuel

Regarding the advertising of a tax inclusive price, IC 6-2.5-2-1(b) provides that “[t]he person who acquires property in a retail transaction is liable for the tax on the transaction and, except as otherwise provided in this chapter, shall pay the tax to the retail merchant as a separate added amount to the consideration in the transaction.” Further, IC 6-2.5-9-4(a) makes it a criminal infraction for a person to assume or absorb Indiana sales or use tax (Source)

Iowa

Yes, but limited – only for alcoholic beverages or admissions to movie theaters or sporting events.

Under Purchase Price/Sale Price 

Kansas

Yes, but only for special events, amusement, entertainment, craft fairs, trade shows

Source

Kentucky

No

Source

Louisiana

Yes

Source

Maryland

No

Source

Maine

Yes

Source

Massachusetts

No

Source

Michigan

No

Source

Minnesota

Yes, but vendor should mark the item,”tax included” on the receipt or invoice, or post a sign indicating that tax is included

Source

Mississippi

Yes; The state of Mississippi does not enforce or have a law regarding including sales tax in the price

Mississippi Department of Revenue Representative via phone

Missouri

Yes; But “tax included in price” needs to be stated on invoice or receipt given to customer

Source

Nebraska

No

Regulations Title 3-16

Reg. 1-039

Nevada

Yes; Vendors must post sign visible to customers that sales tax is included

Source

New Jersey

No; The sales tax must be separately stated on all bills, receipts or sale slips issued to customers.

N.J. Sales Tax Guide

Bulletin S&U-4 (page 24)

New Mexico

Yes; Gross receipts tax (NM equivalent of sales tax) can be stated or included as part of the selling price.

Source

New York

No

Tax Bulletin, Statute 860

North Carolina

Yes, as long as vendor advertises that tax is included

Sales Tax Bulletin 2-1

North Dakota

No, with the exception of alcohol sales

Source

Ohio

No

Source

Oklahoma

Yes; Need to display signage

Rule 710:65-1-6

Pennsylvania

Yes

Source

Rhode Island

Yes; A retailer can include the sales tax as part of the item

Source

South Carolina

Yes – as long as the vendor keeps a written record of exactly how much was charged in sales tax

South Carolina Department of Revenue representative via phone

South Dakota

Yes

Source

Tennessee

Yes; Vendor must display a sign noting that sales tax is included in price

Source

Texas

Yes, but you must follow Texas’s very specific instructions

Source

Utah

Yes; you may include sales tax in the price BUT sales tax amount paid must be on invoice/receipt issued to purchaser

Source

Vermont

No; Sales tax must be separately stated

Source

Virginia

Yes; Vendor must post signage informing customers sales tax is included

Representative of Virginia Tax via phone; Vendors may contact Tax Commissioner & they will write it out for your company

Tax Commissioner

P.O.Box 2475

Richmond, Virginia 23218

Washington

No, with exceptions including restaurant meals where sales tax included in price is explicitly stated

Source

West Virginia

Yes; Vendors must post that sales tax is included in price;

Usual retailers are night clubs/bars, restaurants & similar business

Source

Wisconsin

Yes; Vendors must post that sales tax is included in price

Source

Wyoming

No

Revenue.wyo.gov – Chapter 2 Section 5J

Start your 30 day free trial of TaxJar. No credit card required.