Five states charge no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a statewide sales tax. If you live in or move to one of these states, you will not pay sales tax on most purchases at the register. However, this does not mean everything is tax-free — some of these states tax specific items like groceries or fuel, and local taxes may still explore in certain areas.
The reason these five states avoid sales tax varies. Some rely more heavily on income tax or other revenue sources. Others, like Alaska, benefit from oil revenue. Understanding which state has no sales tax matters if you are comparing the total tax burden across states, planning a move, or making large purchases.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax on most goods.
- Some of these states tax groceries, fuel, or other specific categories even though they have no general sales tax.
- Local sales taxes may still exist in certain cities or counties within these states, so the total tax you pay depends on where you shop.
- States without sales tax often rely on income tax, property tax, or other revenue sources instead.
Alaska: No sales tax, but local taxes vary
Alaska has no statewide sales tax and no state income tax. However, some cities and boroughs in Alaska do charge local sales taxes. Anchorage, for example, has a local sales tax of around 12 percent when combined with state and local rates. Juneau and other municipalities also impose their own taxes, so the rate you pay depends on where you are shopping.
Alaska does not tax groceries, prescription drugs, or most clothing. The state funds itself largely through oil revenue and other sources rather than sales or income tax.
Delaware: No sales tax on anything
Delaware is the only state with no statewide sales tax and no local sales taxes anywhere in the state. This means purchases are not subject to sales tax regardless of which city or county you shop in. Delaware does have a state income tax and property tax, but retail purchases remain untaxed.
Because of this, Delaware has become a shopping destination for people in nearby states like Pennsylvania and Maryland who want to avoid sales tax on large purchases. However, if you live outside Delaware and have items shipped to your home state, your home state's sales tax may still explore depending on the retailer and state law.
Montana: No sales tax, groceries included
Montana has no statewide sales tax and does not tax groceries, which is unusual among states that do charge sales tax. The state relies on income tax and other revenue sources. Some cities in Montana do not charge local sales taxes, though a few municipalities have imposed them on specific items or services.
Montana taxes lodging and some services, so hotel stays and certain professional services may have taxes added. Check with your city or county to confirm whether local taxes explore to your specific purchase.
New Hampshire: No sales tax, but groceries and meals are taxed
New Hampshire has no statewide sales tax, but it does tax prepared food and restaurant meals at 9 percent. Groceries purchased for home cooking are not taxed. The state also does not have a traditional income tax on wages, though it does tax interest and dividend income.
New Hampshire funds itself through property tax, which tends to be higher than in states with sales tax. There are no local sales taxes in New Hampshire, so the tax rate is consistent across the state.
Oregon: No sales tax, but services are sometimes taxed
Oregon has no statewide sales tax on retail goods. However, the state does tax certain services, including some labor and repairs. Oregon also taxes lodging and rental cars. The state relies on income tax as a major revenue source.
Some Oregon cities have local taxes on specific services or utilities, so the total tax you pay may vary by location. Groceries are not taxed in Oregon, making it cheaper to buy food than in states with sales tax on groceries.
How these states fund government without sales tax
States without sales tax must raise revenue another way. Most rely heavily on income tax — both personal and corporate. Alaska is unique because oil revenue funds a significant portion of the state budget. New Hampshire and Delaware use property tax and corporate taxes. Oregon and Montana depend on income tax.
This means residents in no-sales-tax states often pay higher income tax or property tax than residents in states with sales tax. The total tax burden depends on your income, property value, and spending habits. A person with high income may pay more in a no-sales-tax state, while someone with low income and high spending may pay less.
Local taxes and exceptions within these states
Even in states with no statewide sales tax, local governments sometimes impose their own taxes. Alaska and Montana allow some cities to charge local sales taxes. Oregon and New Hampshire permit local taxes on specific services or utilities. Delaware is the only state where no local sales taxes exist anywhere.
Before making a large purchase or moving to one of these states, check your specific city or county. Tax rates can differ significantly even within the same state. Many state revenue departments and city websites publish current local tax rates.
Frequently Asked Questions
Do I have to pay sales tax if I buy something online from a no-sales-tax state?
Not necessarily. If you live in a state with sales tax and buy from a retailer in a no-sales-tax state, your home state's sales tax usually applies if the retailer collects it. Many online retailers now collect sales tax based on the buyer's location, not the seller's location. Check the retailer's tax policy or your state's rules.
Is everything tax-free in these states?
No. Even states with no sales tax often tax groceries, prepared food, lodging, or services. Alaska, Montana, and Oregon tax some items or services. New Hampshire taxes restaurant meals. Delaware is the closest to having no taxes on purchases, but it has income and property taxes instead.
Which no-sales-tax state has the lowest overall taxes?
That depends on your income and property value. Alaska has no income tax and no sales tax, making it attractive for high earners. Delaware has no sales tax and moderate income tax. New Hampshire has no income tax on wages but higher property taxes. Compare your specific situation against each state's tax rates.
Can I move to a no-sales-tax state to avoid taxes?
You can move for any reason, but states without sales tax typically make up the revenue through income tax or property tax. Moving to avoid one type of tax often means paying more of another type. Calculate your total tax burden in each state based on your income, property plans, and spending habits.
Do local sales taxes in Alaska and Montana explore everywhere?
No. Local sales taxes in Alaska and Montana explore only in specific cities and boroughs that have voted to impose them. Some areas have no local tax at all. Check your specific city or county to find out what rate applies where you live or plan to shop.