Five states have no statewide sales tax
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge 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 prepared food, and local taxes may still apply in certain areas.
The absence of a statewide sales tax does not mean these states have no taxes at all. Most fund government services through income tax, property tax, or other revenue sources. Understanding what your state taxes and what it does not helps you budget for actual costs when you shop or plan a move.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though some allow local sales taxes in specific areas.
- Alaska taxes alcohol and tobacco at the point of sale; New Hampshire taxes prepared food; Montana taxes lodging and rental cars.
- Even in no-sales-tax states, you may pay sales tax on certain items depending on what you buy and where you buy it.
- States without sales tax often rely on income tax, property tax, or other fees to fund schools, roads, and public services.
What each no-sales-tax state actually taxes
Alaska has no statewide sales tax but allows municipalities to set their own rates. Anchorage and Juneau charge local sales tax. The state also taxes alcohol and tobacco separately at purchase.
Delaware has no sales tax on any purchases, including groceries, clothing, and prepared food. This applies statewide with no local exceptions. Delaware does tax hotel stays and car rentals at 8 percent.
Montana has no sales tax on most items but taxes lodging (hotels, motels, vacation rentals) at 7 percent and rental cars at 4 percent. Groceries are not taxed.
New Hampshire has no sales tax on clothing or groceries but taxes prepared food and restaurant meals at 8 percent. The state also taxes lodging at 9 percent.
Oregon has no statewide sales tax, but some counties allow local tax on lodging and rental cars. Groceries are not taxed. Oregon taxes cigarettes and alcohol through excise taxes rather than sales tax.
How local sales taxes work in no-sales-tax states
Even though these five states have no statewide sales tax, some allow cities and counties to impose their own. Alaska is the clearest example: the state itself does not tax sales, but Anchorage charges 3.5 percent local sales tax and Juneau charges 5 percent. If you shop in those cities, you pay tax at checkout.
Oregon and Montana allow local taxes on specific items like hotel rooms and rental cars, but not on general retail purchases. Delaware and New Hampshire do not allow local sales taxes at all, so you pay nothing on most purchases anywhere in those states.
When you move to or visit one of these states, check your specific city or county rules. A purchase that is tax-free in one town may be taxed in another, even within the same state.
Why these states have no sales tax
States choose their tax structure based on how they want to fund government services. Alaska relies heavily on oil revenue and does not need sales tax income. Delaware, Montana, New Hampshire, and Oregon chose to fund schools, roads, and public services through income tax, property tax, or other sources instead.
This does not mean residents pay less overall. A state with no sales tax often has higher income tax or property tax to make up the difference. New Hampshire, for example, has no sales tax but taxes income at 5 percent. Oregon has no sales tax but taxes income at rates up to 9.9 percent. The total tax burden depends on how much you earn, own property, and spend.
What you should know before moving to a no-sales-tax state
If you are considering a move to one of these states, understand that no sales tax does not mean lower overall taxes. Compare income tax rates, property tax rates, and what specific items are taxed in your target state and city.
For example, if you earn $60,000 per year and plan to move from a state with 6 percent sales tax to Oregon, you will save on sales tax but pay Oregon income tax instead. If you own a home, check property tax rates — they vary widely even among no-sales-tax states. New Hampshire has no income tax but higher property taxes. Montana has income tax and property taxes but no sales tax on most items.
The real savings or cost depends on your personal situation: how much you spend, how much you earn, and whether you own property.
Frequently Asked Questions
Do I pay sales tax on groceries in these states?
No, not in any of the five no-sales-tax states. Alaska, Delaware, Montana, New Hampshire, and Oregon all exempt groceries from sales tax. Some states that do have sales tax exempt groceries too, but these five do not tax them at all.
Can I avoid taxes by shopping in a no-sales-tax state?
Not if you live elsewhere. Most states tax purchases made by residents, even if you buy something in another state and bring it home. Your home state may require you to pay use tax on out-of-state purchases. Check your state's rules on mail order and online shopping.
Does no sales tax mean lower prices?
Prices may be lower at checkout, but not necessarily overall. States without sales tax fund services through income tax or property tax instead. If you earn money or own property in a no-sales-tax state, you pay those taxes instead. Compare all taxes, not just sales tax, to understand the real cost of living.
What about online shopping in these states?
Online retailers must collect sales tax in states that have it. In the five no-sales-tax states, most online purchases are not taxed at checkout. However, if you live in a state that has sales tax, you owe use tax on items shipped to you, even if the seller did not collect it.
Do tourists pay sales tax in no-sales-tax states?
Tourists pay the same tax as residents. In Alaska, you pay local sales tax in Anchorage or Juneau. In New Hampshire, you pay tax on prepared food and lodging. In Montana, you pay tax on hotel rooms and rental cars. In Delaware and Oregon, most purchases are not taxed.