Five states have no statewide sales tax
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. This means when you buy something in these states, there is no sales tax added at the register by the state government itself.
However, the absence of state sales tax does not mean you pay nothing extra. Alaska allows municipalities to charge local sales taxes, and some cities and boroughs do. Delaware, Montana, New Hampshire, and Oregon have no local sales taxes either, so purchases in those states genuinely carry no sales tax at all.
The reason these states have no sales tax varies. Some, like New Hampshire, rely on other revenue sources like income tax or business taxes. Others, like Alaska, use oil revenue. Montana and Oregon have made deliberate policy choices to avoid sales tax. Delaware has historically positioned itself as a tax-friendly state for business.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though Alaska allows local taxes in some cities.
- In Delaware, Montana, New Hampshire, and Oregon, you pay no sales tax at all—neither state nor local.
- Each state funds government services differently: New Hampshire uses income tax, Alaska uses oil revenue, and others rely on business or property taxes.
- If you live in a state with sales tax but shop online from a no-sales-tax state, you may still owe sales tax to your home state depending on state law and the retailer's policies.
How Alaska's local sales taxes work
Alaska has no statewide sales tax, but about 100 municipalities and boroughs in the state do charge local sales taxes. The rate varies by location—some cities charge 0%, while others charge up to 7.5% or higher. Anchorage, the largest city, charges 0% sales tax. Juneau charges 5%.
When you shop in Alaska, the sales tax you pay depends entirely on where you are. A purchase in Anchorage has no sales tax. The same purchase in Juneau would include that city's local tax. You need to know which municipality you are in to know what tax rate applies.
This local-only system means Alaska residents and visitors cannot assume they know the tax rate without checking the specific city or borough.
States with no sales tax and no income tax
New Hampshire and Tennessee stand out because they have no statewide sales tax and no income tax on wages. However, New Hampshire does tax interest and dividend income, and Tennessee taxes only interest and dividend income (not wages). Neither state has local sales taxes.
This combination is rare. Most states that avoid sales tax use income tax as their main revenue source. New Hampshire's approach relies on property taxes, business taxes, and the interest and dividend tax. Tennessee's model is similar, though it is phasing out its tax on interest and dividends by 2022 (this phase-out may have already occurred depending on when you read this).
For most people buying everyday items, the practical effect is the same: no sales tax is added to purchases in these states.
What happens when you order online from a no-sales-tax state
Ordering from a retailer in Alaska, Delaware, Montana, New Hampshire, or Oregon does not automatically mean you avoid sales tax. Your home state's tax law determines what you owe. Most states now require online retailers to collect and send sales tax to the buyer's home state, regardless of where the retailer is located.
If you live in a state with sales tax and order from a no-sales-tax state, the retailer will usually collect your home state's sales tax at checkout. This is true even though the retailer is based in a state with no sales tax. The retailer is collecting tax on behalf of your state, not their own.
The exception is small retailers or marketplaces that do not have a physical presence in your state and are not required by law to collect tax. In those cases, you may owe "use tax" to your home state, though most people do not report it. Check your state's tax authority website for the current rules in your location.
How no-sales-tax states fund schools and services
States without sales tax must fund education, roads, police, and other services through other revenue sources. The methods vary significantly.
New Hampshire relies on property taxes (which are relatively high), business taxes, and the tax on interest and dividends. Alaska uses oil revenue from the state's oil industry, which historically provided enough money that the state did not need sales tax. Montana uses property taxes and income tax. Oregon uses income tax and property taxes. Delaware uses income tax, business taxes, and corporate taxes.
The result is that residents in these states may pay higher income tax, property tax, or other fees than residents of states with sales tax. There is no such thing as a state with no taxes—the burden is simply distributed differently.
Comparing your total tax burden across states
The absence of sales tax does not mean you pay less tax overall. A person living in New Hampshire may pay no sales tax but higher property tax and income tax on investments. A person in Oregon pays no sales tax but higher income tax on wages. Someone in Alaska may pay no sales tax and no income tax but lives in a state where the cost of living is high and property taxes exist.
If you are considering moving to a no-sales-tax state or comparing the cost of living, look at the full picture: income tax rates, property tax rates, business taxes, and any other fees. Sales tax is only one piece of the tax system.
A tax professional or your state's revenue department can help you understand your total tax burden in a specific state.
Frequently Asked Questions
Do I have to pay sales tax if I buy something in a no-sales-tax state and bring it home?
Not in the state where you bought it. However, your home state may require you to pay "use tax" on items you bring back. Most states have use tax laws, though enforcement is rare for individual purchases. Check your state's tax authority website to understand the rule where you live.
Why does Alaska have local sales taxes if the state has no sales tax?
Alaska's constitution allows municipalities to set their own taxes. The state government chose not to impose a statewide sales tax, but cities and boroughs can. This creates a patchwork where tax rates depend on your location within the state.
If I move to a no-sales-tax state, will I save money?
Not necessarily. States without sales tax typically charge higher income tax, property tax, or both. Your total tax burden depends on your income, property value, and spending habits. Calculate your taxes under both scenarios before deciding.
Do online retailers charge sales tax on orders shipped to no-sales-tax states?
Most large retailers do not charge sales tax on orders shipped to Alaska, Delaware, Montana, New Hampshire, or Oregon because those states have no sales tax to collect. However, check the retailer's policy, as some may charge tax based on their own rules.