Sales Tax (VAT) in USA: What Foreigners Should Know When Visiting

Sharing is caring!

Sales Tax (VAT) Refunds for Foreigners Visiting U.S.A.

Foreign tourists visiting the United States do not receive sales tax (VAT) refunds. Disappointing, yes? We agree.

Read on, though, and we’ll explain why. Later on, we’ll also discuss how it’s still possible for you to reduce, or even avoid, U.S. sales taxes.

Why don’t foreign visitors receive sales tax (VAT) refunds in the U.S.? In short, it’s because the U.S. does not have a national sales tax. That’s right, the U.S.’s national government, which we call the federal government, does not tax consumer goods.

Who imposes sales taxes, then? State and local governments do. Although U.S. sales taxes and VATs are technically different types of taxes, in reality, their effects are the same: They both make our purchases more expensive.

VAT Do You Mean A Sales Tax Is Different?

Value-Added Tax (VAT)

A Value-Added Tax (VAT) is a tax many countries add to goods and services. Foreigners visiting a VAT-charging country may request a refund of VAT taxes paid during their visit.

If Ray, who is American, buys goods in France, for example, he can request a refund from France’s national government when he leaves.

Sales Tax in the U.S.A.

In contrast, the U.S.’s national government does not levy a national sales tax. Therefore, foreigners cannot petition the U.S.’s national (i.e. federal) government for a refund.

Instead, each U.S. state elects its own tax policies. Thus, since there are 50 U.S. states, there are 50 different taxing authorities and, therefore, 50 different tax policies.

This state-level autonomy creates great diversity in U.S. sales tax rates. Some states charge very little, others charge lots. A handful charge zero sales tax (VAT).

Furthermore, in addition to state sales tax, local sales taxes are sometimes charged by county and city governments.

In summary: [State sales tax] +[ Local sales tax] = Total sales tax (VAT)

The four states that charge zero sales tax are: Delaware, Montana, New Hampshire, and Oregon.

A fifth state, Alaska, also has zero state sales taxes, but local governments there may levy sales taxes. Even so, among the 46 states that charge sales tax, Alaska has the lowest rates.

Who Collects Sales Tax (VAT) in the U.S.?

Below are the different levels of government in the U.S. Each level is subordinate to the one below it.

Municipal governments: Individual towns and cities.

County governments: Each U.S. state is composed of multiple counties. Each county, in turn, is composed of dozens of neighboring towns and cities.

State governments: State of California, State of New York, State of Wisconsin, etc.

The federal government: the U.S.’s national government.

As mentioned, the federal government does not charge sales tax. Only state, county, and local governments do. 

Taxes charged by county and municipal governments are referred to as local taxes.

U.S. states and local governments do not, unfortunately, grant sales tax (VAT) refunds to foreigners. There are, however, two exceptions to this, which we’ll discuss later.

Map of the United States detailing average VAT/sales tax rates in each state. States with lower sales tax rates are reprsensented by lighter colors. States with higher tax rates are represented by darker colors. Map indicates the average tax rate expressed as a percentage as well as the state's ranking in terms of sales tax burden.
This map shows average sales tax (VAT) rates in each U.S. state.  A state’s sales tax rate is fixed throughout the state. What fluctuate are local sales tax rates, which are levied by individual cities and counties. Particularly noteworthy on this map are New Hampshire, Delaware, Montana, and Oregon, which charge zero sales tax. (Map courtesy of: taxfoundation.org/maps).

Où est le remboursement de Claudette?/Where is Claudette’s Refund?

Suppose Claudette, a French tourist, buys a $200 pair of shoes in New York City (NYC).

In NYC, the sales tax rate is 8.875%.

With tax, Claudette pays $217.75 for her shoes. Thus, she paid $17.75 in tax (VAT).

This tax breaks down as:

  • 4% New York State tax (state tax)
  • 4.5% New York City tax (local tax)
  • 0.375% Metropolitan Commuter Transportation District surcharge (local tax)
  • Total: 8.875%

Neither New York City nor New York State grant sales tax refunds to foreign visitors. Therefore, Claudette cannot apply for a tax refund.

State Sales Tax is Fixed/Local Sales Taxes Vary

In the map below, each colored section represents a county in New York State. New York City is toward the bottom. It is comprised of five boroughs. Each borough, in turn, is also a county.

They are:

  • The Bronx (Bronx County)
  • Queens (Queens County)
  • Manhattan (New York County)
  • Brooklyn (Kings County)
  • Staten Island (Richmond County)

NYC’s five counties share a single tax policy. Outside NYC, however, each county decides what, if any, sales tax to charge.

To summarize: State sales tax rates are fixed. Local sales tax rates vary.

Map of New York State detailing the 62 counties that make up the state. Each county is represented by a colorful section with the county's name on it. This image is used in an article explaining U.S. VAT/sales tax to foreign visitors.
Seen here are New York State’s 62 counties. Although New York City is its most famous city, New York State, as you can see, is quite large. (Map courtesy of www.digital-topo-maps.com)

How Foreign Tourists Can Reduce or Avoid Sales Tax (VAT) in U.S.A.

Strategy 1: Shop in U.S. states with zero tax

As mentioned earlier, Delaware, Montana, New Hampshire, and Oregon charge zero sales taxes.

Similarly, Alaska does not charge a state sales tax, but some local governments there do charge tax.

Incidentally, the computer used to write this post was purchased in Delaware. Care to guess why?

In Delaware, we asked the computer store employee whether many people from nearby states came to enjoy the state’s tax-free shopping. She said yes, but that it wasn’t just limited to people living close by.

Someone had recently come from California to pick up a $20,000 gold phone. Now that’s traveling to avoid sales taxes!

Whenever you’re close enough, consider a day trip to a tax-free state or stop in one if you’re passing through to somewhere else. Don’t have wheels? You can join Zipcar today and get $25 free driving in the tank. Hourly and daily rates include gas, insurance and 180 free miles per day. Cars around the corner are available 24/7. Hop on board at zipcar.com.

[Full Disclosure: As a Zipcar affiliate, TripHoney receives compensation if you purchase through this link. This does not affect your price in any way whatsoever.]

Strategy 2: Research Sales Tax for Your Specific U.S. Destination

Method 1: Search by County

Search for: [county] + [state]  + [sales tax rate]

For Example: Marin County, California, sales tax rate*

*In Marin County’s case, you’ll notice sales tax rates vary even by town. In that case, search rates for a specific town in Marin County.

Not sure which county you’ll be in? Search for: [the word ‘county’]+ [city ]+ [state].

For example: county, Burlington, Vermont

Method 2: Search by City

This method’s success depends, of course, on whether the city you’re visiting levies its own local taxes.

Search for:  [city]+ [state] + [sales tax rates].

For example: Des Moines, Iowa, sales tax rates.

If it’s a large, well-known city just enter: [city] + [sales tax rates].

For example: Miami, sales tax rates

Strategy 3: Look up tax rates for clothing in select states

Say the word shopping and most people will probably think of? Clothes, that’s right!

Most U.S. states charge sales tax on clothing. Some, however, do not. Still others exempt clothes from sales taxes up to a set dollar amount.

Delaware, Montana, New Hampshire, and Oregon, you may remember, charge zero sales taxes.

In this case, however, we’re referring specifically to states that do charge general sales taxes, but make special allowances for clothing.

 

Map of the United States detailing states that charge VAT/sales taxes on clothing and states that either exempt or limit sales taxes on clothing purchases. States are differentiated with different colors representing how each state treats clothing for sales tax purposes.
See all the dark blue? Those are states that charge taxes on clothing. Conversely, non-blue states either charge zero tax on clothes or make special provisions for clothing purchases. Note: On this map, Alaska is shown as a zero tax state because there are no state taxes, but there might be minor local taxes. (Map courtesy of the Tax Foundation.)

 

States with special sales tax allowances for clothing:

  • Massachusetts
  • Minnesota
  • New Jersey
  • New York
  • Pennsylvania
  • Rhode Island
  • Vermont

Laws regarding sales tax on clothes can get confusing. New York State, for example, exempts clothing from state sales taxes up to a specific dollar amount. Local governments in New York State, though, might still charge their own taxes.

On top of that, the meaning of the term clothing also varies by state. In some states, athletic wear is not tax-exempt, while in others, footwear is not.

First, start by searching for: [state] + [clothing] + [sales tax].

For example: Rhode Island, clothing, sales tax.

Still have questions about your destination’s tax policies?

Try:

  • a.) Contacting a specific store where you plan to shop; or
  • b.) Contact the local Chamber of Commerce.

To find a Chamber of Commerce, search: [city] + [state] + [chamber of commerce]

For example: Denver, Colorado, Chamber of Commerce.

Strategy 4: Consider states offering partial refunds

Louisiana and Texas, it seems, are making half-hearted attempts to offer foreign tourists tax refunds. We say half-hearted because their programs are not overly concerned with their main task: Putting cold, hard cash back in foreign visitors’ pockets.

Texas, for example, charges an ungentlemanly 50% handling fee if you dare to request a cash refund.

Louisiana, believe it or not, wants to send you a U.S. paper check overseas if your refund is greater than $500. Laissez les temps modernes rouler, Louisiana!

This last policy reminds us of an old, southern saying: That dog don’t hunt. In other words, it doesn’t make sense.

  • Firstly, it’s extremely difficult to find a bank overseas that will accept U.S. checks.
  • Secondly, even if you do find one, you’ll nevertheless be charged a sizeable processing fee.
  • And finally, it can take weeks or months for said transfer to complete.

Read about refunds in Louisiana here.

Read about refunds in Texas here.

VAT/Sales Tax Strategy 5: Take a Tax Holiday

And, lastly, some states offer what they call tax holidays. These programs are mainly designed for residents of those states and don’t, unfortunately, offer much incentives for foreign visitors.

Review which states participate in tax holidays here.

Was this post helpful? Please consider sharing it through your favorite social media.

© Copyright TripHoney.com, All Rights Reserved

Close Menu
shares