The Five States With No Sales Tax

Five states do not charge a sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. This means when you buy most goods in these states, you pay only the price on the tag — no additional percentage is added at checkout.

However, "no state sales tax" does not mean zero tax on purchases. Alaska allows individual cities and boroughs to charge local sales taxes, which range from 1% to 7.5% depending on where you shop. The other four states — Delaware, Montana, New Hampshire, and Oregon — have no state or local sales tax on retail purchases.

Some of these states fund government services differently. New Hampshire and Montana, for example, tax business income or other activities instead. Understanding this distinction matters if you are comparing the true cost of living across states.

Key Takeaways

  • Alaska, Delaware, Montana, New Hampshire, and Oregon have no state sales tax, though Alaska permits local taxes of up to 7.5%.
  • The next-lowest state rates are 2.9% in Colorado and 3% in Georgia and Hawaii, but these rates apply only to certain categories of goods.
  • State sales tax rates do not include local or city taxes, which can add 1% to 8% depending on your location.
  • States with no sales tax often fund services through income tax, business tax, or other revenue sources that may affect your overall tax burden.

States With the Lowest Sales Tax Rates

After the five no-tax states, the next tier includes states with very low rates. Colorado has a state rate of 2.9%, the lowest among states that do charge sales tax. Georgia and Hawaii both charge 3%. Louisiana and Wyoming charge 4%.

These low rates apply to most purchases, but some states carve out exceptions. For instance, Colorado and Georgia may tax groceries differently than other goods, or may exempt certain items entirely. The actual amount you pay depends on what you are buying and where in the state you make the purchase, since local taxes stack on top of the state rate.

If you live near a state border, the difference between a 2.9% state rate and a 7% or 8% rate in a neighboring state can add up quickly on large purchases. Some people cross state lines for major buys, though this strategy works only if you have a legitimate reason to be in that state and do not owe tax where you actually live.

How Local Taxes Change the Real Rate You Pay

State sales tax is only part of the picture. Most states allow counties, cities, or special districts to add their own sales taxes on top. In some places, these local taxes are small — 0.5% or 1%. In others, they can reach 8% or more.

For example, Tennessee has a state rate of 9.55%, but some cities add local taxes that push the total to 9.75% or higher. Colorado's state rate is 2.9%, but Denver adds 3.62%, bringing the total to 6.52%. A person shopping in Denver pays roughly double the state rate alone.

The combined rate — state plus local — is what you actually pay. When comparing states, look up the rate for the specific city or county where you will be shopping, not just the state number. Many tax websites let you enter a zip code to see the combined rate.

States That Tax Groceries Differently

Some states with low overall rates still tax groceries at the full rate, while others exempt food or tax it at a reduced rate. This affects your day-to-day spending more than occasional large purchases.

Montana and New Hampshire have no sales tax at all, so groceries are never taxed. Delaware and Oregon also exempt groceries. However, Alaska allows local jurisdictions to tax groceries, so the rule depends on which city or borough you live in.

States like Colorado and Georgia tax groceries at the full state rate. If you are comparing the cost of living between states, factor in whether groceries are taxed. A state with a 3% rate that taxes groceries may cost more for a family's weekly shopping than a state with a 5% rate that exempts food.

How Sales Tax Rates Have Changed

Sales tax rates are not fixed forever. States adjust them based on budget needs, and local jurisdictions add or remove taxes as well. Over the past decade, some states have raised rates to fund schools or infrastructure, while others have held steady.

The rates described in this guide reflect current law, but they can change. If you are making a major financial decision based on tax rates — such as deciding where to relocate — check the current rate for your specific location before you move. State revenue departments and tax websites maintain up-to-date rates by zip code.

Local rates change more frequently than state rates. A city might add a 0.5% tax for a new transit project, or a county might adjust its rate during budget season. These changes are usually announced in advance, but they happen regularly enough that rates from five years ago may no longer be accurate.

Why States Set Different Tax Rates

States with no sales tax do not have zero government revenue — they fund services through other means. New Hampshire and Montana use income tax or business tax. Alaska uses oil revenue and a permanent fund. Delaware relies on corporate taxes and fees. Oregon uses income tax.

States with higher sales taxes often have lower or no income tax. This is a trade-off: you pay more when you spend, but less when you earn. A state with 8% sales tax and no income tax may cost the same or less than a state with 5% sales tax and 5% income tax, depending on how much you earn versus how much you spend.

Understanding this trade-off matters if you are comparing the true tax burden across states. The lowest sales tax state is not necessarily the lowest-tax state overall.

Frequently Asked Questions

Do I pay sales tax if I buy something online and have it shipped to a no-tax state?

It depends on the seller and the state. Most online retailers now collect sales tax based on where the item is being shipped, even if that state has no sales tax. Some sellers may not collect tax for no-tax states. The safest assumption is that you will owe tax based on your shipping address, regardless of the state's rate.

If I live in a high-tax state but work in a low-tax state, which rate applies?

Sales tax is based on where you make the purchase, not where you live or work. If you buy something in a store in the low-tax state, you pay that state's rate. If you buy online and have it shipped to your home in the high-tax state, you typically pay the high-tax state's rate.

Are there any purchases that are never taxed, even in high-tax states?

Most states exempt certain items: prescription medications, medical equipment, and sometimes groceries or clothing. The specifics vary widely by state. Some states tax clothing but exempt shoes. Others tax all clothing. Check your state's rules for the category of item you are buying.

Does moving to a no-tax state save money if I have to pay income tax there instead?

Not necessarily. A state with no sales tax but high income tax may cost more overall than a state with moderate sales tax and low income tax. The answer depends on your income, how much you spend, and the specific rates in each state. Calculate your total tax burden in both places before deciding.