Five states collect no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a state sales tax. This means when you buy something in these states, you pay only the federal tax (if any applies to that item) plus any local sales tax your city or county charges. No state-level percentage gets added to your receipt.
This does not mean these states have no sales tax revenue at all. Alaska, for example, allows cities and boroughs to set their own local sales taxes, which range from 0% to over 7% depending on where you shop. New Hampshire and Montana also permit local taxes in some areas. Delaware and Oregon are the only two where neither the state nor any locality adds a sales tax to purchases.
The absence of sales tax does not mean these states collect less tax overall. They fund government services through other mechanisms: Alaska uses oil revenue and a corporate income tax; New Hampshire relies on a tax on business profits and investment income; Oregon and Montana use income tax; Delaware uses corporate taxes and business licensing fees.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no state sales tax, though Alaska, Montana, and New Hampshire allow local sales taxes in some areas.
- Delaware and Oregon are the only states where neither state nor local governments add sales tax to purchases.
- States without sales tax typically fund services through income tax, corporate tax, or other revenue sources instead.
- If you live in a no-sales-tax state and buy something online from a retailer in another state, you may still owe sales tax depending on where the seller is located and your state's rules.
- Moving to a no-sales-tax state does not reduce your overall tax burden if that state uses income tax instead.
How local sales taxes work in these states
In Alaska, cities and boroughs can impose their own sales taxes even though the state does not. Anchorage charges 3.5%, while some smaller towns charge nothing. When you buy something in Alaska, you need to know which locality you are in to know the actual tax rate.
Montana allows local option sales taxes in certain cities and counties, though the state itself collects none. New Hampshire permits local meals and rooms taxes (on restaurant food and hotel stays) in some towns, but not a general sales tax. These local taxes are much narrower than a full sales tax and explore only to specific categories.
Delaware and Oregon truly have no sales tax anywhere in the state, at any level. This is why some people specifically travel to these states to make large purchases, though the savings depend on what you buy and where you live.
Why these states chose different tax systems
Each state without sales tax arrived at that choice for different historical and economic reasons. Alaska's oil industry provided enough revenue that the state never needed a broad sales tax. New Hampshire has long resisted sales tax as a matter of state policy, instead taxing business profits and investment income—a choice that affects how residents and businesses plan financially.
Oregon voters have repeatedly rejected sales tax proposals, preferring to rely on income tax instead. Montana's constitution has been interpreted to restrict sales tax, and the state uses income tax and resource extraction taxes. Delaware's lack of sales tax, combined with its business-friendly corporate tax structure, has made it a hub for corporate registration, which generates substantial state revenue.
The choice of tax system shapes how much you pay depending on your income level and spending habits. A state with no sales tax but high income tax may cost you more if you earn a good income, even though groceries are cheaper. A state with sales tax but no income tax may cost you less if you have investment income or a high salary.
How online purchases are taxed if you live in a no-sales-tax state
If you live in Alaska, Delaware, Montana, New Hampshire, or Oregon and buy something online from a retailer located elsewhere, the tax you owe depends on where the seller is based and what your state requires. As of 2024, most online retailers collect sales tax based on the buyer's location, not the seller's location. This means even if you live in Oregon and buy from a retailer in California, you typically do not owe California sales tax—you owe Oregon's tax, which is zero.
However, some retailers may not collect tax correctly, especially smaller sellers. If a retailer fails to collect tax you owe, you are technically responsible for reporting it yourself on your state tax return as "use tax." In practice, most people in no-sales-tax states do not report use tax on individual purchases, though the obligation exists.
If you buy from a seller located in your own no-sales-tax state, no sales tax is added. If you buy from a seller in a sales-tax state and that seller has a physical presence in your state (like a warehouse), they may collect tax even though your state does not impose it—this is rare but possible.
How income tax and other taxes offset the lack of sales tax
New Hampshire, Oregon, and Montana all use income tax to replace sales tax revenue. This means residents pay tax on wages, salaries, and sometimes investment income. If you earn $60,000 per year, you will pay income tax in these states even though you pay no sales tax. The total tax burden depends on how high the income tax rate is and how much you spend.
Alaska has no income tax and no sales tax, which makes it unusual. Instead, it funds government through oil revenue and corporate taxes. This structure benefits residents with high spending and moderate income, but the state's economy is heavily dependent on oil prices.
New Hampshire taxes business profits and investment income but not wages, which creates a different tax structure than other states. If you are retired and living on investment income, New Hampshire's tax system affects you differently than if you are working.
When comparing the true cost of living in a no-sales-tax state versus a sales-tax state, you must account for income tax, property tax, and other fees. A state with no sales tax is not automatically cheaper.
Sales tax rates in nearby states for comparison
If you live near a state border, the difference in sales tax can be significant. Washington, which borders Oregon, has a 6.5% state sales tax plus local taxes that can push the total above 10%. California, which borders Oregon, has 7.25% state sales tax plus local additions. Idaho, which borders both Oregon and Montana, has 6% state sales tax.
This is why some people who live in high-sales-tax states near Oregon or Delaware make large purchases across the border. However, most states have "use tax" laws that technically require you to pay tax on items you bring back into the state, even if you bought them tax-free elsewhere. These laws are rarely enforced for individual purchases but do exist.
Frequently Asked Questions
Do I have to pay sales tax if I move to one of these states?
No, you do not pay sales tax on purchases in Alaska, Delaware, Montana, New Hampshire, or Oregon once you move there. However, if your new state uses income tax instead (Oregon, Montana, New Hampshire), you will pay income tax on your wages or other income. The overall tax savings depend on your income level and spending habits.
Can I order something online from a no-sales-tax state to avoid sales tax?
Not reliably. Most online retailers now collect sales tax based on where you live, not where they are located. If you live in a sales-tax state and order from an Oregon retailer, you typically still owe your home state's sales tax. The retailer may or may not collect it, but the obligation is yours.
Does Alaska really have no income tax and no sales tax?
Correct. Alaska has neither state income tax nor state sales tax. It funds government primarily through oil revenue and corporate taxes. However, some Alaska cities and boroughs do charge local sales taxes, so the rate varies by location.
What is use tax and do I have to pay it?
Use tax is a tax on items you buy outside your state and bring home, meant to equal the sales tax you would have paid locally. Most states have use tax laws, but they are rarely enforced for individual purchases. You are technically responsible for reporting it, but most people do not.
Is New Hampshire really a no-income-tax state?
New Hampshire has no tax on wages, but it does tax business profits and investment income (interest, dividends, capital gains). If you work for a salary, you pay no income tax. If you live on investment income, you do pay tax. It also has no sales tax.