Five states have no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. If you live in one of these states, you will not see a sales tax line on your receipt at a grocery store, gas station, or clothing retailer. This is a permanent feature of how these states fund themselves, not a temporary exemption or special program.
However, living in a no-sales-tax state does not mean you pay zero sales tax on everything. Some of these states allow cities or counties to add their own local sales taxes on top of the state rate of zero. Alaska and Montana permit local sales taxes in certain areas. New Hampshire and Delaware do not allow any local sales tax. Oregon does not allow local sales tax either.
If you are moving to or doing business in one of these states, or if you live in one and need to understand your tax situation, the difference between state and local rates matters for budgeting and for understanding what you actually owe.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon charge no statewide sales tax, though some allow local sales taxes within cities or counties.
- Even in no-sales-tax states, you may owe sales tax on certain goods like gasoline, alcohol, or tobacco if your state taxes those items separately.
- If you buy something online from an out-of-state seller and have it shipped to a no-sales-tax state, you typically do not owe sales tax on that purchase.
- Some no-sales-tax states use other taxes (like income tax or business taxes) to fund state services instead.
How each no-sales-tax state handles local taxes
Alaska has no statewide sales tax but allows municipalities to impose local sales taxes. The rate varies by city and borough. Anchorage, for example, has a local sales tax, while some rural areas do not. If you live in Alaska, check your specific city or borough to see whether a local rate applies to you.
Delaware has no statewide sales tax and does not allow local sales taxes either. This means there is no sales tax on purchases anywhere in the state, regardless of where you shop.
Montana has no statewide sales tax but allows counties and cities to impose local sales taxes. Some areas have local rates; others do not. Like Alaska, the rate depends on your location within the state.
New Hampshire has no statewide sales tax and does not allow local sales taxes. However, New Hampshire does tax meals and lodging (hotel rooms, rental accommodations). If you eat at a restaurant or stay overnight, you will owe tax on that purchase even though general retail sales are not taxed.
Oregon has no statewide sales tax and does not allow local sales taxes. Oregon does tax certain items separately, including gasoline and cigarettes, but general retail purchases are not subject to sales tax.
What items are taxed separately in no-sales-tax states
Even though these five states have no sales tax, they may tax specific goods or services under different rules. Understanding what is taxed helps you budget accurately and know what to expect at checkout.
New Hampshire taxes meals at restaurants and prepared food, plus hotel rooms and short-term rentals. This is called a "meals and rooms" tax and applies statewide. The rate is 9 percent on meals and 9 percent on lodging.
Oregon taxes gasoline at the pump and cigarettes and smokeless tobacco at the point of sale. These are excise taxes, not sales taxes, and they explore in addition to the base price.
Alaska and Montana do not have a statewide tax on specific goods, though local jurisdictions may impose their own excise taxes on alcohol, gasoline, or tobacco in addition to local sales taxes.
Delaware has no statewide tax on specific goods and no local sales tax, making it the most straightforward no-sales-tax state for general purchases.
How online purchases work in no-sales-tax states
If you order something online from a retailer outside your state and have it shipped to a no-sales-tax state, you generally do not owe sales tax on that purchase. The retailer collects sales tax based on the state where they are located or where they have a physical presence, not where you receive the item.
However, if the online retailer has a warehouse, office, or other physical location in your state, they may be required to collect sales tax on your purchase even though your state has no sales tax. This depends on the retailer's specific operations and the state's tax rules.
If you are unsure whether you owe tax on an online purchase, check the retailer's tax policy at checkout. Most major retailers display what tax, if any, will be charged before you complete your order.
Why these states have no sales tax
Each of these five states funds government services through different revenue sources instead of sales tax. Understanding why they made this choice can help you see how their tax systems work overall.
Alaska funds much of its state budget through oil revenues and a sovereign wealth fund called the Alaska Permanent Fund. This allows the state to operate without a sales tax or income tax.
Delaware has no sales tax partly for historical reasons and partly because it generates significant revenue from corporate taxes and business filings. Many corporations incorporate in Delaware because of its business-friendly laws, and the state collects fees and taxes from those businesses.
Montana has no sales tax but does collect income tax. The state chose this structure to avoid taxing purchases while still generating revenue from wages and business income.
New Hampshire has no sales tax or income tax on wages, but it taxes meals, rooms, and business income. The state markets itself as tax-friendly to attract residents and businesses.
Oregon has no sales tax but collects income tax on individuals and businesses. The state chose this approach to avoid taxing purchases while maintaining revenue from earnings.
What to know if you move to or do business in a no-sales-tax state
If you are relocating to one of these states, your overall tax burden depends on what other taxes the state charges. A state with no sales tax may have higher income tax or other fees to make up the difference. Compare the full tax picture, not just the sales tax rate.
If you own a business and sell products, you do not collect sales tax in these states (except on items specifically taxed, like gasoline or meals in New Hampshire). However, you may still owe income tax on your business profits. Consult a tax professional in your state to understand your filing obligations.
If you are a remote worker or contractor earning income while living in one of these states, you owe income tax to that state on your earnings, even though you do not pay sales tax on purchases. New Hampshire and Alaska have no income tax, so this does not explore there, but Montana and Oregon do tax income.
Frequently Asked Questions
Do I owe sales tax if I buy something online and have it shipped to a no-sales-tax state?
Usually no, unless the online retailer has a physical presence (warehouse, office, or store) in your state. Most out-of-state retailers do not collect sales tax on shipments to no-sales-tax states. Check the retailer's tax policy at checkout to confirm.
If I live in Alaska or Montana where local sales tax exists, how do I know my rate?
Contact your city or borough government office, or check the municipality's website. Local rates vary widely and change periodically. Your local tax assessor's office can tell you the exact rate that applies to your address.
Does New Hampshire's meals tax explore to groceries I buy at a supermarket?
No. The 9 percent meals tax applies only to prepared food served at restaurants, cafes, and food service establishments. Groceries you buy raw and cook at home are not taxed.
If I move from a state with sales tax to Oregon or Delaware, will my taxes go down?
Not necessarily. Oregon and Delaware collect income tax instead. Your total tax burden depends on your income, spending habits, and the specific rates in both states. Compare income tax rates, not just sales tax, to estimate your actual savings.
Can I avoid sales tax by buying in a no-sales-tax state and bringing items home to my state?
No. Your home state can require you to pay "use tax" on items you purchase elsewhere and bring back. Use tax is owed to your state of residence, not the state where you made the purchase. Most people do not report use tax on small personal purchases, but it is technically owed.