Sales tax is a tax imposed by the government when citizens purchase goods or services. It is collected by the payment processing entity or a third party, such as Paypal
Sales tax is considered a pass-through tax system, meaning when the tax is collected from a merchant, instead of keeping it, they pass it on to the state along with a sales tax return.
Sales tax rates vary by state. For example, Hawaii’s sales tax rate is 4.44%, but California’s sales tax rate is 7.25%. All but five states have some sort of sales tax in place. The states without a sales tax are Delaware, Oregon, New Hampshire, Alaska and Montana.
Local counties, districts and cities can also collect sales tax. This means an extra 1-2% on top of the state sales tax. This tax goes towards funding things like local schools, roads and parks.
For example, in Philadelphia, you’ll be charged a tax of 1.5 cents per ounce for sugary drinks like soda and other sweetened beverages. But the same soda won’t have the city tax if bought outside city limits.