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, you pay only the price on the tag — no additional percentage is added at checkout. However, this does not mean shopping is tax-free everywhere within these states, and it does not mean there are no other taxes on purchases.
Alaska allows cities and boroughs to charge local sales taxes, so some purchases in Anchorage or Juneau will have tax added even though the state does not. Delaware, Montana, New Hampshire, and Oregon have no local sales taxes either, making them the only states where sales tax truly does not apply to most purchases.
The five no-sales-tax states are spread across different regions and have different economies. Alaska relies partly on oil revenue. Delaware has a large corporate presence. Montana and Oregon are rural and urban mixed. New Hampshire is in the Northeast. None of them replaced sales tax with a single alternative — their tax structures vary.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon charge no statewide sales tax, though Alaska allows local taxes in some cities.
- Even in no-sales-tax states, you may pay tax on groceries, prepared food, or services depending on state law.
- These five states fund government through other taxes: income tax, property tax, corporate tax, or excise taxes on specific goods.
- If you live in a no-sales-tax state and buy something online from a seller in another state, you may owe use tax to your home state.
What you still pay tax on in no-sales-tax states
Even though these states have no sales tax, some purchases are still taxed. The rules differ by state. New Hampshire taxes prepared food and restaurant meals but not groceries. Montana taxes some services but not most goods. Oregon taxes some services. Alaska's local taxes apply in certain cities to most purchases.
Excise taxes — taxes on specific items like gasoline, cigarettes, or alcohol — exist in all five states regardless of sales tax status. These are separate from sales tax and appear as part of the final price or on the pump. If you buy a car, you may owe registration or title fees that function like a tax on the purchase.
The safest approach is to check the specific state's Department of Revenue website before assuming a purchase is tax-free. What is untaxed in one state may be taxed in another, even among the five no-sales-tax states.
How these states fund government without sales tax
States without sales tax must raise money through other sources. New Hampshire and Alaska have no state income tax either, which is rare. New Hampshire relies on property tax, business taxes, and a tax on dividends and interest income. Alaska uses oil revenue and a small tax on certain business activities.
Montana, Oregon, and Delaware all have state income tax. Montana and Oregon tax individual income at rates that vary by bracket. Delaware taxes income and also has a corporate tax that brings in significant revenue because many companies incorporate there for legal reasons, not because they operate there.
Property taxes, vehicle registration fees, and excise taxes on fuel and alcohol also fund state services in these five states. The total tax burden — what residents pay across all taxes combined — varies. Some residents in no-sales-tax states pay more overall tax than residents in states with sales tax, depending on income and property value.
Online purchases and use tax in no-sales-tax states
If you live in a no-sales-tax state and buy something online from a retailer in another state, the retailer may not charge you sales tax. However, your home state may require you to pay use tax — a tax on purchases brought into the state from outside.
Use tax is owed to your home state, not to the state where you bought the item. Most people do not pay it because it is not automatically collected at checkout. However, if you are audited, a state can ask for records of out-of-state purchases and demand use tax payment. The rate is usually the same as that state's sales tax would be, even though the state has no sales tax — this creates a legal oddity where you owe a tax the state does not officially charge.
In practice, use tax is rarely enforced for individual purchases. It is more commonly applied to large business purchases or when a state has reason to audit a resident's records.
Differences between the five no-sales-tax states
| State | State Income Tax | Local Sales Tax Allowed | Tax on Groceries |
|---|---|---|---|
| Alaska | No | Yes, in some cities | No |
| Delaware | Yes | No | No |
| Montana | Yes | No | No |
| New Hampshire | No (except dividends/interest) | No | No |
| Oregon | Yes | No | No |
Alaska stands apart because it allows local sales taxes. If you shop in Anchorage, you pay a local tax. If you shop in a rural area outside any city, you do not. This makes Alaska's tax situation more complex than the other four states.
New Hampshire and Alaska are the only two states with no income tax at all. This makes them unusual nationally. The other three — Delaware, Montana, and Oregon — fund state services partly through income tax on residents and businesses.
Moving to or visiting a no-sales-tax state
If you are moving to one of these states, remember that the lack of sales tax does not mean lower overall taxes. New Hampshire residents pay property tax and a tax on investment income. Alaska residents in cities pay local sales tax. Montana and Oregon residents pay income tax. Calculate your total tax burden based on your income, property value, and spending habits, not just on sales tax.
If you are visiting one of these states, you will notice no sales tax at the register. Prices on tags are final. This can feel like a discount compared to states with 6 to 10 percent sales tax, but it is simply a different way of collecting revenue — the money comes from residents and businesses through other taxes instead.
Some people travel to these states specifically to make large purchases like cars or electronics to avoid sales tax. However, most states require you to pay sales or use tax on items you bring back home, so the tax savings may not be real. Check your home state's rules before making a trip to buy something expensive.
Frequently Asked Questions
Do I pay any tax at all in these states?
Yes. Even though there is no sales tax, you pay income tax (in most of these states), property tax, vehicle registration fees, and excise taxes on gas and alcohol. The total amount you pay in taxes depends on your income and property value, not just on whether sales tax exists.
Can I avoid paying tax by buying in a no-sales-tax state and taking it home?
Not legally. Your home state usually requires you to pay use tax on out-of-state purchases. The rate is often the same as your state's sales tax would be. Enforcement is rare for small personal purchases, but it is technically owed.
Are groceries tax-free in all five states?
Groceries are not taxed in Alaska, Delaware, Montana, and Oregon. New Hampshire does not tax groceries either. However, prepared food and restaurant meals are taxed in some of these states, particularly New Hampshire. Check your specific state's rules.
Why did these states choose not to have sales tax?
Each state made this choice at different times for different reasons. Alaska and New Hampshire chose to rely on other revenue sources. Montana, Oregon, and Delaware developed their tax systems around income and property tax instead. Historical decisions about how to fund government, not recent policy changes, explain why these five states remain without sales tax.
If I live in a no-sales-tax state, do I pay less tax overall?
Not necessarily. Total tax burden depends on income, property value, and state-specific taxes. A high-income earner in Oregon pays more income tax than a low-income earner in a state with sales tax. Compare your specific situation, not just the presence or absence of sales tax.