Five states do not charge sales tax on purchases

Alaska, Delaware, Montana, New Hampshire, and Oregon do not have a statewide sales tax. If you live in or are shopping in one of these states, you will not pay sales tax at checkout on most items. This is different from the other 45 states, which charge between 4 and 7.25 percent in statewide sales tax, though some cities and counties add local taxes on top.

The reason these five states avoid sales tax varies. Some rely more heavily on income tax or other revenue sources. Alaska has no state income tax and no sales tax, instead drawing revenue from oil production. New Hampshire and Montana also have no sales tax but do tax income. Delaware and Oregon have no sales tax but do tax income as well. Each state's tax structure reflects different choices about how to fund schools, roads, and public services.

If you are moving to one of these states or ordering items to be shipped there, the lack of sales tax can mean real savings on large purchases. However, this does not mean everything is cheaper overall—income tax rates and other fees may offset the savings depending on your situation.

Key Takeaways

  • Alaska, Delaware, Montana, New Hampshire, and Oregon charge no statewide sales tax on retail purchases.
  • Some of these states tax income instead, so the overall tax burden depends on your income level and spending habits.
  • Even in no-sales-tax states, some cities or counties may charge local taxes on specific items like groceries or prepared food.
  • Online retailers may still collect sales tax based on where you live, not where the seller is located, so a no-sales-tax address does not always mean no tax at checkout.

How each no-sales-tax state funds public services

Alaska funds state government primarily through oil revenue and does not tax income or sales. This means residents and visitors pay nothing in sales tax, and Alaska residents pay no state income tax. However, some municipalities in Alaska do charge local sales taxes, so the statewide rule has exceptions depending on which city you are in.

Delaware has no sales tax but does tax income at rates between 2.2 and 5.75 percent depending on income level. The state also taxes corporate income and has historically been a hub for business incorporation because of its tax-friendly corporate laws. Residents shopping in Delaware pay no sales tax, but they do pay income tax on wages.

Montana has no sales tax but taxes income at rates up to 6.9 percent. The state also taxes capital gains and has specific taxes on certain goods like tobacco and alcohol. Residents and visitors shopping in Montana pay no sales tax on most items, but the state makes up revenue through income and excise taxes.

New Hampshire has no sales tax and no income tax on wages, but it does tax dividends and interest income at 5 percent. The state funds schools and services through property taxes, which tend to be higher than in states with income tax. Residents pay no sales tax and no wage income tax, but property owners pay more in property taxes.

Oregon has no sales tax but taxes income at rates up to 9.9 percent, among the highest in the nation. The state also taxes corporate income and capital gains. Residents and visitors pay no sales tax, but Oregon residents with higher incomes pay more in state income tax than residents of many other states.

What items are taxed differently in no-sales-tax states

Even though these five states have no statewide sales tax, some items may still be subject to special taxes. Gasoline, cigarettes, and alcohol are taxed in most or all of these states through excise taxes—a per-unit tax added at the pump or at purchase rather than as a percentage of the price.

Groceries and prepared food are handled differently across the five states. In Alaska, most groceries are not taxed, but prepared food and restaurant meals may be subject to local taxes depending on the municipality. In Delaware, Oregon, Montana, and New Hampshire, groceries are generally not taxed, but restaurant meals and prepared foods may be taxed or subject to local rules.

Services like haircuts, car repairs, and professional fees are usually not subject to sales tax in any state, including these five. However, some states tax specific services—for example, some states tax hotel rooms or rental cars. In the no-sales-tax states, these items are usually not taxed either, though local rules can vary.

Local taxes in no-sales-tax states

Even though these states have no statewide sales tax, some cities and counties within them do charge local sales taxes. This is most common in Alaska, where many municipalities have adopted local sales taxes to fund schools and services. If you are shopping in Anchorage or Juneau, you may pay a local sales tax even though Alaska has no statewide tax.

In Delaware, Oregon, Montana, and New Hampshire, local sales taxes are rare or nonexistent. However, some counties or cities may have specific taxes on certain items—for example, a local tax on prepared food or hotel stays. Before assuming you will pay no tax in a specific city, check the local rules for that municipality.

The best way to know whether you will pay tax on a specific purchase in a specific location is to ask the retailer or check the city or county tax office website. Local rules change, and what applies in one town may not explore in the next.

How online shopping works in no-sales-tax states

If you live in one of these five states and order items online, you may still pay sales tax at checkout. Since 2018, online retailers have been required to collect sales tax based on where the buyer lives, not where the seller is located. This means that even if you live in a no-sales-tax state, the retailer may collect tax if your state has a sales tax—but if you live in Alaska, Delaware, Montana, New Hampshire, or Oregon, most retailers will not charge you sales tax.

However, some retailers may not yet have updated their systems to account for no-sales-tax states, or they may charge tax out of caution. If you are charged sales tax on an order shipped to a no-sales-tax state, contact the retailer's customer service to request a refund. Keep your receipt and shipping address confirmation to show where the order was delivered.

Marketplace sellers on platforms like Amazon or eBay may have different tax rules than the platform itself. Some third-party sellers may not be set up to handle no-sales-tax states correctly. If you notice a discrepancy, check the seller's tax policy or contact them directly.

Comparing overall tax burden across states

Living in a no-sales-tax state does not automatically mean you pay less tax overall. A state with no sales tax may have higher income tax, property tax, or excise taxes that offset the savings. For example, Oregon has no sales tax but has one of the highest income tax rates in the nation, so a high-earning resident may pay more total state tax than someone in a state with both sales tax and lower income tax.

If you are considering moving to one of these states or comparing the cost of living, look at your specific situation: your income level, how much you spend on taxed items, and whether you own property. A person with low income and high spending might save money in a no-sales-tax state. A person with high income might pay more in income tax than they would save on sales tax.

Online tax calculators can help you estimate your total state tax burden in different states, but they are rough guides. For a detailed comparison, consider speaking with a tax professional who can look at your specific income, deductions, and spending patterns.

Frequently Asked Questions

Do I have to pay sales tax if I buy something in a no-sales-tax state and take it home to another state?

No. Sales tax is charged based on where the purchase is made, not where you live. If you buy an item in Oregon and take it home to California, you pay Oregon's sales tax (which is zero) at the register. You do not owe California sales tax on that item later.

Can I order online from a no-sales-tax state to avoid paying sales tax?

Not reliably. Online retailers are required to charge sales tax based on where you live, not where they are located. If you live in a state with sales tax and order from an Oregon retailer, you will likely pay your home state's sales tax. If you live in Oregon and order from anywhere, you should not be charged sales tax.

Do no-sales-tax states charge tax on used items or secondhand purchases?

Generally, no. Used items sold by individuals or at secondhand shops are usually not subject to sales tax in any state. However, used items sold by a business may be taxed depending on the state and the type of item. Check with the seller or your local tax office if you are unsure.

Is gas cheaper in no-sales-tax states?

Not necessarily. While there is no sales tax on gasoline in these states, they often charge excise taxes per gallon instead. The total price at the pump depends on the excise tax rate, crude oil prices, and refining costs. Gas prices vary widely even between neighboring states with the same tax structure.

What happens if a retailer charges me sales tax in a no-sales-tax state by mistake?

Contact the retailer and ask for a refund. Provide your receipt and proof that the purchase was made in a no-sales-tax state. Most retailers will refund the tax once they verify the error. If the retailer refuses, you can file a complaint with your state's tax office or attorney general.