5 States With No Sales Tax

Just as there are several states with no income taxes, there are also multiple states forgoing sales taxes. These states don’t impose state-level sales taxes, meaning you won’t be assessed an additional fee when purchasing a retail good or service. This can make a huge difference in how much you pay for retail items, since rates can range as high as 7.25% in California, according to research from Tax Foundation. The following five states currently have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. We take a closer look at those states in this guide.

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What Are Sales Taxes?

Sales taxes are amounts of money added to the cost of a product or service when purchased by a consumer. After the point of purchase, retailers then pass these taxes on to the state and/or local government.

Currently, 45 states and the District of Columbia impose a general sales tax, but there are five exceptions that don’t charge statewide sales taxes at all. Of those five, however, some allow localities to impose sales taxes and excise taxes. We explore those states below.

The States With No Sales Tax

Alaska

Alaska doesn’t charge a statewide sales tax, but that doesn’t mean that the state is wholly devoid of sales tax. Some municipalities impose local sales taxes of up to 7.85%. For instance, Kalifornsky charges a local sales tax of 3%, while Soldotna imposes a combined sales tax of 6%. Meanwhile, Juneau’s sales tax is 5%.

Delaware

Though Delaware doesn’t impose a state sales tax, it does require certain businesses to pay a gross receipts tax. Consumers don’t have to account for this tax, but the sellers of the goods or services do. The gross receipts tax rates vary based on business activity, typically ranging from .0945% to .7468%, according to the state’s Division of Revenue website.

Montana

Montana is quite similar to Alaska in that it allows localities to assess a sales tax. These cities are usually tourist destinations, and they charge resort and local option taxes. The resort tax is a local option tax charged on the retail value of products and services sold by recreational facilities, camping and lodging facilities, restaurants and other food establishments, public establishments serving alcohol, and establishments selling luxury items, according to the Montana Department of Transportation and Land Use. Montana’s resort tax municipalities are currently Red Lodge, Whitefish, Virginia City and West Yellowstone.

These taxes are levied at the city and county levels and cannot exceed 3%. But the taxes only apply to areas with populations under 5,500, that meet state-imposed resort qualifications.

New Hampshire

Neither the state nor any of its localities charge a sales tax, but certain goods and services garner excise taxes and other taxes. These include an 8.5% tax on room, meals and car rentals; a 9% tax on restaurants; a 7% tax on phone services; and a tax of $0.00055 cents per megawatt-hour on electricity. A timber tax of 10% is applied to the value of the wood at the time of cutting, with an exception for personal use.

Since the statewide sales tax is set at 0%, local governments are unable to impose sales taxes. Instead, they levy excise taxes on the sale of items such as tobacco and electricity.

Oregon

Like New Hampshire, Oregon doesn’t impose a state-wide sales tax. The state does, however, allow cities to impose their own sales taxes. For instance, Ashland charges a 5% local sales tax on the sale of prepared food. Oregon also charges excise taxes, which are levied on cigarettes, tobacco, alcohol, gasoline and other products.

It’s also worth noting that Oregon has a higher personal income tax compared to other states. However, it doesn’t tax intangible properties, such as bonds or stocks.

5 Other Low-Tax States

In addition to sales taxes, you may also want to consider a state’s income tax, property tax and estate or inheritance taxes. While some states have no income tax, they may offset the loss of revenue with higher property or sales taxes. This is why it’s important to weigh these factors in relation to your lifestyle, income and long-term financial goals.

For example, if you’re nearing retirement, a state with no income tax and low property taxes could make a significant difference in your ability to preserve your savings. For those who rely more on investments, understanding how a state taxes dividends and interest income may be more important.

The following are five low- or no-tax states that are popular among those looking to minimize their tax burden.

Florida

Florida is one of the most tax-friendly states in the U.S. with no state income tax, which is a major draw for residents, especially retirees. This lack of income tax applies to all forms of earnings, including wages, salaries and investment income, making it an attractive option for those with substantial savings or investments. Additionally, Florida does not have an estate or inheritance tax, allowing residents to pass on wealth to heirs without state-level tax complications. Property taxes in Florida are relatively moderate, though they can vary depending on the county.

Tennessee

Tennessee has no state income tax on wages or salaries, and as of 2021, it also eliminated taxes on interest and dividends, making it a true no-income-tax state. This is ideal for those with investment income as well as high earners. Property taxes in Tennessee are low compared to the national average, and the state has no estate or inheritance taxes. While Tennessee does impose a sales tax that is higher than the national average, the lack of income tax often offsets this for many residents.

Wyoming

Wyoming is another no-income-tax state, offering residents a significant tax advantage. In addition to not having a state income tax, Wyoming also boasts low property taxes and no estate or inheritance taxes. This combination of low taxes makes Wyoming particularly attractive for retirees and high-income earners looking to maximize their financial resources. Wyoming’s reliance on mineral extraction for revenue allows it to keep taxes on residents low, making it one of the most tax-friendly states in the U.S.

South Dakota

South Dakota stands out for having no state income tax, which applies to both earned income and investment income. The state also imposes low property taxes, making it an appealing destination for individuals looking to minimize their overall tax burden. South Dakota does not levy an estate tax or inheritance tax, further adding to its appeal as a tax-friendly state. Like Wyoming, South Dakota benefits from its strong economy based on industries that allow the state to keep taxes low.

Nevada

Nevada offers no state income tax, which applies to all forms of personal income, including wages, salaries and investment income. This makes it an attractive destination for both workers and retirees. Property taxes in Nevada are moderate, and while the state does rely on sales taxes for revenue, it’s still considered a tax-friendly state due to the absence of income tax. Nevada also does not have any estate or inheritance taxes, making it an appealing choice for those looking to pass on wealth to their heirs.

Bottom Line

If you live in any of the first five states mentioned above, you can count out any state-level sales taxes on your purchases. You may pay local sales taxes, excise taxes, resort/local option taxes or related taxes depending on where you live, so it’s wise to check your city’s official government website so you won’t be blindsided by any additional fees.

Tax Planning Tips for Beginners

A financial advisor can help you navigate areas of finance such as tax planning, investing, retirement planning and more. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When planning out your budget, you’ll also want to account for income taxes. Even if you’re in a state without income taxes, you’ll still have to pay federal income taxes. Our federal income tax calculator can help you.