Five states charge no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a statewide sales tax. That means when you buy something in these states, you pay only the price on the tag—no percentage added at checkout. Some of these states do allow cities or counties to collect local sales taxes, so the full picture depends on where in the state you are shopping.
This does not mean these states have no taxes. Most make up the revenue through income tax, property tax, or other sources. New Hampshire, for example, has no sales tax and no income tax on wages, but does tax interest and dividends. Alaska has no income tax and no sales tax. The way each state funds schools, roads, and services varies widely.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though some allow local taxes in certain cities or counties.
- Alaska and New Hampshire have no income tax on wages, while Delaware, Montana, and Oregon do tax income.
- Even in no-sales-tax states, some goods like groceries or clothing may be taxed differently depending on local rules.
- If you live near a state border, knowing which state has no sales tax can affect where you choose to shop for large purchases.
How local taxes work in no-sales-tax states
In Alaska, cities and boroughs can impose their own sales taxes. Anchorage, for example, has a local sales tax of 3.5 percent, while other parts of Alaska have no local tax. So your total tax bill depends on which city you are in, not just the state.
Montana allows no local sales taxes at all—the entire state is sales-tax-free from top to bottom. Delaware and Oregon also prohibit local sales taxes. New Hampshire allows some cities to collect a meals and rooms tax (on restaurant food and hotel stays), but not a general sales tax on goods.
If you are buying something expensive and live in a state with sales tax, it can be worth checking whether a nearby no-sales-tax state allows you to make the purchase there. The savings on a car or large appliance can be significant, though you may owe use tax in your home state if you bring it back.
Income tax and other revenue sources in these states
Alaska and New Hampshire stand out because they have no income tax on wages. Alaska also has no sales tax, making it the only state with neither tax. Alaska funds its government partly through oil revenue and a sovereign wealth fund called the Alaska Permanent Fund.
New Hampshire taxes interest, dividends, and capital gains instead of wages. Delaware, Montana, and Oregon all have income taxes on wages. Delaware also has a corporate tax and a gross receipts tax on certain businesses. Montana taxes income but not groceries. Oregon taxes income and has a high top rate, but also does not tax groceries.
Each state's tax structure reflects its own choices about who pays and what gets taxed. There is no single pattern—some rely on income, some on property, some on business taxes, and some on natural resource revenue.
Groceries and other goods: what is and is not taxed
Even in states with no sales tax, some items may be taxed under different rules. In Montana, groceries are not taxed, but prepared food is. In Oregon, groceries are not taxed, but some prepared foods are. Alaska does not tax groceries either.
Delaware and New Hampshire do not tax groceries. However, New Hampshire taxes prepared food and restaurant meals. The definition of "grocery" versus "prepared food" varies—a rotisserie chicken from a grocery store deli might be taxed differently than a raw chicken from the meat counter.
Clothing is usually not taxed in these states, but again, the rules can be specific. If you are buying something and unsure whether it will be taxed, ask the cashier or check the state's tax department website before you buy.
How to know your tax rate if you live near a border
If you live in a state with sales tax but near Alaska, Delaware, Montana, New Hampshire, or Oregon, you may be tempted to cross the border for big purchases. The savings can be real, but there are limits and rules.
Most states with sales tax require you to pay use tax on items you buy out of state and bring home. Use tax is usually the same rate as sales tax. So if you buy a $1,000 item in a no-sales-tax state and bring it back to a state with 7 percent sales tax, you may owe $70 in use tax to your home state. Few people report use tax, and enforcement is rare for individual purchases, but it is technically owed.
For vehicles, the rules are stricter. Most states require you to register a car in your home state and pay tax there, even if you bought it in a no-sales-tax state. Check your state's motor vehicle department before buying a car across the border.
Why some states have no sales tax
The reasons vary. Alaska and Montana are resource-rich states that historically relied on oil, mining, and timber revenue. New Hampshire has a strong anti-tax political tradition and funds schools through property taxes instead. Delaware has a large corporate tax base and attracts business registration fees. Oregon voters have repeatedly rejected sales tax proposals.
These decisions were made over decades and reflect each state's history, politics, and economy. They are not accidents—they are the result of deliberate policy choices about how to fund government.
Frequently Asked Questions
Do I have to pay sales tax if I order something online from a no-sales-tax state?
Not necessarily. If the seller has no physical presence in your state, they may not be required to collect sales tax. However, you may owe use tax to your home state. Most online retailers now collect sales tax based on the buyer's address, regardless of where the seller is located.
Can I move to Alaska or New Hampshire to avoid taxes?
You can move there, but you will still owe taxes to your previous state on income earned before you left, and you will owe property tax in your new state. Moving for tax reasons alone is rarely a financial win unless you are relocating for a job anyway.
Is it cheaper to live in a no-sales-tax state?
Not always. Alaska and New Hampshire have high property taxes or other costs that offset the lack of sales tax. Montana and Oregon have income taxes that can be higher than sales taxes in other states. The total tax burden depends on your income, property value, and spending habits.
What about online shopping from Amazon or other big retailers?
Amazon and most large retailers now collect sales tax in all states, including those with no statewide sales tax. They collect based on your shipping address, not the seller's location. Small sellers may not, but the rules have tightened in recent years.
If I buy a car in a no-sales-tax state, do I avoid sales tax?
No. Most states require you to pay sales tax on a vehicle when you register it in your home state, even if you bought it elsewhere. Some states allow a credit for sales tax paid in another state, but you will still owe the difference if your home state's rate is higher.