Five States Charge No Sales Tax at All

Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. If you live in or buy from a business in one of these states, you will not pay sales tax on most purchases at the register.

This does not mean these states have no taxes — they fund schools, roads, and services through other methods. Alaska relies heavily on oil revenue. Delaware, New Hampshire, and Oregon use income tax instead. Montana uses income tax and a small tax on certain services. Each state made a different choice about how to raise money.

The practical effect depends on what you buy and where you live. A resident of Oregon pays no sales tax on groceries or clothing. A resident of New Hampshire pays no sales tax on anything, including cars and electronics. But if you order something online from a seller in a state with sales tax, you may still owe tax depending on where the seller is located and your state's rules.

Key Takeaways

  • Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though some allow cities to charge local sales tax.
  • These states fund government services through income tax, property tax, business tax, or other revenue sources instead of sales tax.
  • Online purchases are taxed based on the seller's location and your state's tax laws, not on whether your state has sales tax.
  • Some no-sales-tax states still tax specific items like gasoline, alcohol, or tobacco at higher rates.

Local Sales Tax in No-Sales-Tax States

Even though these five states have no statewide sales tax, some cities and counties within them do charge local sales tax. The rules vary by state.

Alaska allows municipalities to charge local sales tax. Anchorage charges 3.5 percent. Juneau charges 5 percent. Other towns may charge different rates or none at all. When you buy something in Alaska, check your receipt to see whether local tax was added.

Montana allows cities to charge local sales tax on certain items. Some towns tax groceries; others do not. The rate and what is taxed depends on the city. Helena and Missoula have local sales taxes on most goods.

Delaware, New Hampshire, and Oregon do not allow local sales tax. If you buy something in these states, you pay no sales tax at any level — state or local.

How These States Pay for Schools and Roads

States without sales tax still need money for police, schools, highways, and public services. They raise it differently.

New Hampshire and Tennessee (which also has no sales tax) rely on income tax from wages and investments. New Hampshire's income tax applies only to dividends and interest, not wages. Oregon uses income tax on wages and business profits. Alaska has no income tax and no sales tax — it funds government largely through oil taxes and investment returns from the Alaska Permanent Fund.

Delaware uses income tax, property tax, and business taxes. It also has a corporate tax that is lower than most states, which attracts businesses to incorporate there.

Montana uses income tax on wages and business profits, plus property tax and taxes on specific goods like alcohol and tobacco.

Special Taxes on Specific Items

Even in states with no sales tax, you will pay tax on some purchases. These are usually called excise taxes or special taxes, and they explore to specific items.

All five no-sales-tax states tax gasoline. Alaska charges about 14.4 cents per gallon in state tax. Montana charges about 27.75 cents per gallon. Oregon charges about 36 cents per gallon. New Hampshire charges about 24 cents per gallon. Delaware charges about 27 cents per gallon. These rates change periodically and vary by location.

Alcohol and tobacco are also taxed in all five states, even though there is no general sales tax. The tax is built into the price you see at the register. Cigarettes, beer, wine, and spirits all carry state excise taxes.

Online Shopping and Sales Tax in No-Sales-Tax States

If you live in a state with no sales tax and order something online, whether you pay sales tax depends on where the seller is located and your state's rules.

Most online sellers now collect sales tax based on where you live, not where they are. This means if you live in Oregon and order from Amazon, you will not pay sales tax because Oregon has none. If you live in New Hampshire and order from a seller in California, you will not pay California sales tax — you will pay based on New Hampshire's rules, which means no sales tax.

The exception is if you order from a seller in a state that has sales tax and that seller does not collect tax from your state. This is rare now. Most large retailers collect tax in all states where they ship. Small sellers may not, but the burden is on you to report and pay tax owed to your own state — most people do not do this.

Comparing Your Total Tax Burden

Living in a no-sales-tax state does not necessarily mean you pay less tax overall. You may pay more in income tax or property tax instead.

New Hampshire has no sales tax and no income tax on wages, but property taxes are high — among the highest in the nation. A homeowner pays more in property tax than they would save on sales tax.

Oregon has no sales tax but charges income tax on wages. The income tax rate ranges from 4.75 to 9.9 percent depending on income. A person earning $50,000 per year pays more in income tax than they would save on sales tax in a typical year.

Alaska has no income tax and no sales tax in most places, but the cost of living is higher, and some services are more expensive. The tax advantage is real but offset by other costs.

Delaware and Montana use a mix of income tax, property tax, and business tax. Your total tax burden depends on your income, where you live within the state, and what you own.

Frequently Asked Questions

Do I have to pay sales tax if I buy something in person in a no-sales-tax state?

Not on the item itself, unless it is a special-taxed item like gasoline or alcohol. However, some no-sales-tax states allow local sales tax in certain cities. Check your receipt or ask the cashier whether local tax applies where you are shopping.

If I move to a no-sales-tax state, will I pay less in taxes overall?

Not necessarily. You may pay less in sales tax but more in income tax or property tax. New Hampshire and Oregon have high income taxes. New Hampshire has very high property taxes. Compare your total tax burden before moving based on your income and whether you own property.

Can I avoid sales tax by ordering online from a no-sales-tax state?

Only if you live in a no-sales-tax state. If you live in a state with sales tax and order from a seller in Oregon or Alaska, you still owe sales tax to your own state. Most large online sellers now collect tax based on where you live, not where they are.

Why do some states have no sales tax?

Historical and political reasons. Some states chose to fund government through income tax or other sources instead. Alaska has oil revenue. Others made the choice decades ago and have not changed it. There is no single reason — each state's tax system reflects its own history and priorities.

Does no sales tax mean I can buy things cheaper in these states?

On the purchase itself, yes — you pay no sales tax at checkout. But prices before tax may be higher in no-sales-tax states because businesses factor in the lack of sales tax differently. Also, you may pay more in income tax or property tax, which offsets the savings.