Yes, there is a sales tax in Mexico. It’s called the IVA (Impuesto al Valor Agregado), and the standard rate is 16% on almost everything you buy or pay for. A reduced 8% rate applies in designated northern and southern border zones, and basic groceries and medicines carry a 0% rate. On top of the IVA, alcohol, tobacco, sugary drinks, and fuel carry an additional excise tax called the IEPS, and hotel stays add a state lodging tax of roughly 2% to 5%.
How the IVA Works
The IVA is a value-added tax, not a sales tax in the U.S. sense. A U.S. sales tax hits the transaction once, at the register. The IVA is collected at every stage of production and distribution: each business charges IVA on what it sells, deducts the IVA it paid on what it bought, and remits the difference to the government each month. Only the value each business adds gets taxed.
For you as a shopper, the practical effect looks like a sales tax. You pay 16% on top of the listed price, or it’s already baked into the price on the tag. Mexican receipts often itemize the IVA on a separate line, but the total is what you actually hand over. There is no tourist exemption at the register; foreign visitors pay the same IVA as residents.
The Three IVA Rates
Standard 16%
The 16% rate covers the vast majority of transactions: retail purchases, professional services, restaurant meals, hotel rooms, car rentals, and imported goods. If a receipt doesn’t say otherwise, assume 16%.
Border Zone 8%
Businesses physically located in designated northern and southern border zones can charge a reduced 8% IVA. The discount exists to keep Mexican border towns price-competitive with shopping across the border in the U.S., Guatemala, or Belize. Cities like Tijuana and Ciudad Juárez fall inside this zone, and the reduced rate is built into the shelf price.
Zero-Rated Essentials
Certain essential goods carry a 0% IVA rate: basic foodstuffs, prescription and over-the-counter non-patent medicines, agricultural goods and services, books, newspapers and magazines, farm machinery, and exports.1PwC. Mexico – Corporate – Other Taxes For everyday grocery shopping, that means unprocessed fruits, vegetables, eggs, tortillas, and beans carry no IVA at all.
What’s Exempt
A separate category of goods and services is exempt from IVA, meaning no tax is charged. The main exempt categories cover sales of land and residential construction, residential rentals, medical services from licensed professionals, tuition and educational services, most financial services and interest, and salaries and wages.1PwC. Mexico – Corporate – Other Taxes
Note the boundary here. Renting an apartment as a long-term residence is IVA-exempt, but a short-term vacation rental booked through a platform is treated as lodging and carries the full 16% IVA plus state lodging tax.
IEPS: The Extra Tax on Alcohol, Tobacco, and Sugary Drinks
The IVA is not the only consumption tax in Mexico. A separate excise tax called the IEPS (Impuesto Especial sobre Producción y Servicios) applies to specific products the government wants to discourage or regulate. The IEPS is embedded in the retail price, and the 16% IVA is then calculated on top of the IEPS-inclusive price, so the layered effect is real even if invisible on the shelf tag.
Alcohol rates climb with alcohol content. Beer and wine up to 14% alcohol carry a 26.5% IEPS. Beverages between 14% and 20% carry 30%. Spirits and anything above 20% face 53%.
Tobacco taxes jumped under the 2026 tax reform. Cigarettes and most manufactured tobacco products now carry a 200% ad valorem IEPS, up from 160%, plus an additional per-unit charge on cigarettes. Cigars made entirely by hand face a lower 32% rate.
Sugary and flavored beverages are taxed per liter rather than as a percentage. For 2026, the rate is roughly 3.08 pesos per liter for flavored beverages with added sugars, and the reform extended the tax to beverages with non-caloric sweeteners at 1.50 pesos per liter. Fuel also carries an IEPS charge that shifts with government pricing formulas.
If a bottle of tequila costs more on a Mexican shelf than you expect, the IEPS is why.
Hotel and Lodging Taxes
Hotels carry the standard 16% IVA (or 8% in border zones), and every Mexican state adds its own lodging tax called the Impuesto Sobre Hospedaje (ISH). State ISH rates generally run 2% to 5%, with a few states charging more for stays booked through digital platforms.
Popular tourist destinations sit at the higher end. Quintana Roo (Cancún, Riviera Maya) charges 5%, or 6% for platform bookings. Baja California charges 5%. Jalisco, home to Puerto Vallarta, charges 4%. Combined with the 16% IVA, total tax on a hotel room in most major tourist areas runs 19% to 22% of the nightly rate.
These lodging taxes apply the same way to traditional hotels, resorts, and short-term rentals booked through Airbnb or Vrbo. The platform typically collects and remits both the IVA and the state lodging tax.
Tips Are Not Taxed
A voluntary gratuity (propina) is not subject to IVA. At restaurants, a common practice is to tip 10% to 15% of the pre-tax total. Some travelers use the IVA line on the bill as a rough tipping guide, since 16% falls right in that range.
Claiming an IVA Refund as a Tourist
Foreign tourists can recover the IVA paid on physical goods purchased in Mexico, similar to VAT refund schemes in Europe. The requirements are strict enough to catch people off guard.
You need to spend at least 1,200 pesos at a single participating store. Not every shop is enrolled in the refund program, so ask before you buy. Purchases paid by a foreign-issued credit or debit card have no upper limit; cash purchases are capped at 3,000 pesos per tourist.2Servicio de Administración Tributaria. Tax Refund for Foreign Tourists
At the store, ask for a factura that includes your tourist information and the refund request form. When leaving Mexico from an international airport or seaport, present the goods, the receipt, and your passport at an authorized refund counter. Staff verify the goods are leaving with you and process the refund, minus an administrative fee, so you won’t get the full 16% back.2Servicio de Administración Tributaria. Tax Refund for Foreign Tourists
The refund covers only physical goods you take out of the country. Hotel nights, meals, tours, spa treatments, and car rentals are not refundable. Since those categories typically make up most vacation spending, the refund is mainly useful for tourists making significant retail purchases like jewelry, crafts, or clothing.
Streaming Services and Online Purchases
Since June 2020, foreign companies that sell digital services to people in Mexico must register with the SAT and charge the 16% IVA, even without any physical presence in the country. This covers streaming services, digital downloads, online learning platforms, app stores, and platform intermediation.3BDO. Mexico – New Additions to the VAT Law for Digital Service Providers
If you subscribe to Netflix or Spotify from a Mexican address, the 16% IVA appears on your bill. Non-compliant providers can have their access to Mexican internet networks temporarily blocked.
For physical goods purchased online from abroad and shipped into Mexico, the 16% IVA is collected at the border. Depending on the shipment value and courier, the IVA may be collected by the delivery service, the e-commerce platform, or a customs broker before the package reaches you.