Five states have no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a statewide sales tax. This means when you buy something in these states, you pay only the price on the tag — no additional percentage is added at checkout. No local sales taxes exist in these states either, with one exception: Alaska allows municipalities to collect local sales tax, though the state itself does not.
This does not mean these states have no taxes. They fund government services through other mechanisms. New Hampshire and Alaska rely heavily on income taxes (though Alaska has no income tax). Oregon, Montana, and Delaware use income tax and other revenue sources. Understanding what tax a state uses matters because it changes what you pay depending on where you live and where you buy.
If you live in one of these five states, you will not see sales tax on your receipt. If you live elsewhere and buy something while visiting one of these states, you also pay no sales tax on that purchase. The reverse is also true: if you live in a sales-tax state and buy online from a seller in one of these five states, the tax treatment depends on where the seller is located and the state's remote sales tax rules.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon collect no statewide sales tax, though Alaska permits local sales taxes in some municipalities.
- These five states fund government through income tax, business taxes, excise taxes, or other revenue sources instead of sales tax.
- When you buy something in a no-sales-tax state, you pay only the listed price with no additional tax added at the register.
- Online purchases are taxed based on where the seller is located and that state's rules, not where you live as the buyer.
- Some people move to or shop in these states partly for the sales tax savings, but the overall tax burden depends on income tax rates and other state taxes.
How each no-sales-tax state funds itself instead
Alaska has no state income tax and no statewide sales tax. It funds government largely through oil revenue and a small corporate income tax. Residents do not pay personal income tax on wages or investment income. Some Alaska cities and boroughs do collect local sales taxes ranging from 0% to 7.5%, so the tax picture varies by municipality.
Delaware has no sales tax but does tax income. It is known for this combination, which is why many businesses incorporate there. Delaware residents pay income tax on wages and investment income, and the state also collects corporate income tax and business-related taxes.
Montana has no sales tax but collects income tax on wages and investment income. It also uses excise taxes on specific goods like fuel and alcohol, and property taxes on real estate.
New Hampshire has no sales tax and no income tax on wages. However, it taxes investment income (interest and dividends) at 5%. The state funds itself through property taxes, which tend to be higher than in sales-tax states, and business taxes.
Oregon has no sales tax but collects income tax on wages and investment income. Oregon's income tax rates are among the highest in the country. The state also uses property taxes and excise taxes on items like fuel and alcohol.
Why some people move to these states for tax reasons
The absence of sales tax can make a real difference in day-to-day spending. If you buy $100 worth of groceries, clothing, or household goods, you pay $100 in a no-sales-tax state versus $107 to $110 in a high-sales-tax state (depending on the state's rate). Over a year, this adds up.
However, the total tax burden — what you pay in all taxes combined — is not necessarily lower in these states. New Hampshire and Oregon have high income taxes that offset the sales tax savings for wage earners. Alaska has no income tax, which is a major advantage for high earners, but the cost of living is often higher. Delaware has moderate income taxes and attracts businesses more than individual residents seeking tax savings.
A person earning $60,000 per year might pay less total tax in Alaska than in a state with both sales tax and income tax. The same person might pay more in Oregon, where income tax is steep, even without sales tax. The math depends on your income level, what you spend, and which state you are comparing to.
How online purchases are taxed when buying from these states
When you order something online from a retailer located in Alaska, Delaware, Montana, New Hampshire, or Oregon, whether you owe sales tax depends on where you live, not where the seller is. If you live in a sales-tax state and buy from an Oregon retailer, you may owe sales tax to your own state — but the seller will not collect it at checkout.
Most states now require online sellers to collect sales tax based on the buyer's location, a rule that took effect after a 2018 Supreme Court decision. This means a seller in Oregon must collect sales tax from a buyer in California, even though Oregon has no sales tax itself. The seller is acting as a tax collector for the buyer's state.
If a seller does not collect sales tax, you are technically responsible for paying it yourself to your state — this is called "use tax." In practice, most people do not pay it, and most states do not pursue individuals for small amounts. However, the legal obligation exists.
Comparison: sales tax rates in nearby states
To understand the practical difference, it helps to see what you would pay in neighboring states. Washington state, which borders Oregon and Alaska, has a 6.5% to 10.25% sales tax depending on the county. California, which borders Nevada, has a 7.25% to 10.75% rate. New York, near New Hampshire, has a 4% to 8.875% rate depending on the county.
A $500 purchase in Washington costs $500 in Oregon but $532.50 to $551.25 in Washington. Over time, this difference influences where people choose to shop and, in some cases, where they choose to live. However, remember that Oregon residents pay income tax on that same $500 purchase (if it is not groceries or certain other exempt items), whereas Washington residents do not.
What items are tax-exempt in these states
Even in states with sales tax, certain items are usually exempt — groceries, prescription medications, and medical equipment are common examples. In the no-sales-tax states, this distinction matters less for sales tax purposes, but it still matters for other taxes.
In Oregon and Montana, groceries are not subject to income tax, which is a benefit. In New Hampshire, groceries are not taxed, but investment income is. In Alaska, the absence of income tax means groceries are not taxed under that system either. Delaware has no sales tax, so groceries are not taxed at the register, but income tax applies to wages.
The point is that "no sales tax" does not mean "no tax on purchases." It means the tax is collected differently — through income tax, property tax, or other mechanisms — rather than at the register.
Frequently Asked Questions
If I move to Alaska or New Hampshire, will I pay less tax overall?
It depends on your income and spending. Alaska has no income tax, which is a major advantage for high earners. New Hampshire taxes investment income but not wages, so it benefits wage earners but not retirees living on investments. Compare your current total tax bill (income tax plus sales tax) to what you would pay in the new state before deciding.
Do I have to pay sales tax if I buy something online from Oregon and have it shipped to my home?
Not at checkout. However, if you live in a state with sales tax, you may owe use tax to your own state. Most online retailers now collect sales tax based on your location, so the tax would be added before you pay. If it is not, you are technically responsible for reporting it, though enforcement is rare for individuals.
Can I save money by buying things in a no-sales-tax state and bringing them home?
You can save the sales tax on the purchase itself. However, some states require you to pay use tax on items you bring in from out of state. The amount you save depends on your state's sales tax rate and how much you buy. For a single large purchase, the savings can be meaningful; for regular shopping, it is usually not worth the trip.
Why does Alaska allow local sales taxes if the state has no sales tax?
Alaska permits municipalities and boroughs to set their own sales taxes as a way to fund local services without a statewide tax. This means some Alaska cities have local sales tax (up to 7.5%) while others do not. When you shop in Alaska, check the local rate for the specific city or borough.
Is New Hampshire's tax on investment income the same as income tax on wages?
No. New Hampshire's 5% tax applies only to interest and dividend income, not to wages from a job. This is why New Hampshire appeals to wage earners (who pay no income tax on their salary) but not to retirees living on investment income. The distinction matters significantly depending on your income source.