Five states have no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not collect a statewide sales tax. If you live in one of these states, you will not pay sales tax on most purchases at the register. This is a permanent feature of each state's tax code, not a temporary exemption.
However, the absence of a statewide sales tax does not mean you pay nothing extra on purchases. Some of these states tax other things instead — groceries, utilities, or specific goods — to fund state services. And even in states with no sales tax, some cities or counties may still collect a local sales tax on top of the price.
The five no-sales-tax states are spread across different regions and have different economies, so the reason each one avoids sales tax varies. Understanding what your state does tax instead helps you plan your actual spending.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon collect no statewide sales tax on purchases.
- Some of these states tax groceries, utilities, or specific items instead, so you may still pay tax on everyday goods.
- Local sales taxes exist in parts of Alaska and Montana even though the state does not collect sales tax.
- States without sales tax often rely more heavily on income tax, property tax, or business taxes to fund services.
What each no-sales-tax state taxes instead
Alaska has no statewide sales tax and no state income tax. However, some cities and boroughs in Alaska do collect local sales taxes — Anchorage, Juneau, and Fairbanks are examples. If you live in an unincorporated area, you may pay no sales tax at all.
Delaware has no sales tax on most items, including groceries and clothing. Delaware does collect income tax on wages and investment income. Businesses pay a corporate tax, which is why many companies incorporate in Delaware.
Montana has no statewide sales tax but does tax groceries at a lower rate than most states tax general goods. Some cities in Montana also collect local sales taxes. Montana collects income tax on wages and has property taxes.
New Hampshire has no sales tax and no income tax on wages. However, New Hampshire taxes investment income and has a "meals and rooms" tax (8 percent) on restaurant food and hotel stays. Property taxes in New Hampshire are relatively high to fund schools and local services.
Oregon has no sales tax on any purchases. Oregon relies on income tax, which is higher than in many other states, and property tax. Oregon also taxes some services that other states do not, such as certain labor and repairs.
How local sales taxes work in no-sales-tax states
Even though Alaska and Montana have no statewide sales tax, local governments within those states can and do collect sales tax. This means your actual tax burden depends on where you live within the state, not just which state you live in.
In Alaska, the local sales tax rate varies by city and borough. Anchorage collects 3.5 percent local sales tax. Juneau collects 5 percent. Some areas of Alaska have no local sales tax either. You can find your local rate by searching "[your city] Alaska sales tax" or calling your city's tax assessor's office.
In Montana, local sales taxes also vary. Some cities collect 3 percent local sales tax while others collect none. The state does not collect sales tax, but your city may. Check with your city or county government to learn what rate applies where you live.
Why states choose not to collect sales tax
The five states without sales tax made that choice at different times and for different reasons. Some were early states that never adopted sales tax when it became common in the 1930s and 1940s. Others have specific economic or political reasons for avoiding it.
Alaska and New Hampshire have historically resisted sales tax partly because of political culture around taxation. Alaska also has oil revenue that has historically funded state services. Montana and Oregon have long-standing tax structures that rely on income and property tax instead.
Delaware's lack of sales tax is partly historical and partly because the state benefits economically from being a corporate haven. Companies incorporate there partly because of the tax structure, which generates revenue through corporate taxes and fees.
How this affects your actual spending
Living in a no-sales-tax state does not automatically mean you spend less on taxes overall. You may pay more in income tax, property tax, or taxes on specific goods to make up the difference.
For example, New Hampshire has no income tax or sales tax, which sounds like a tax advantage. However, New Hampshire's property taxes are among the highest in the nation. If you own a home, your property tax bill may be significantly higher than in a state with sales tax and lower property taxes.
Oregon has no sales tax but collects income tax at rates higher than the national average. If you earn a salary in Oregon, you will pay more in income tax than you would in a state with sales tax and lower income tax rates.
The real comparison depends on your personal situation: whether you own property, how much you earn, and what you spend money on. A retiree living on investment income might benefit from New Hampshire's structure. A high earner might pay less in a state with sales tax and lower income tax.
What counts as a purchase subject to sales tax
In states that do collect sales tax, the definition of what is taxable varies. Even in no-sales-tax states, understanding what would be taxed elsewhere helps you understand tax policy.
Generally, sales tax applies to tangible goods — things you can touch and take home. Groceries, clothing, electronics, and furniture are examples. Services — haircuts, repairs, medical care — are often not taxed, though this varies by state.
In Oregon, which has no sales tax, some services are taxed that would not be taxed in other states. Labor and repairs can be subject to Oregon's tax code. In New Hampshire, the meals and rooms tax applies to restaurants and hotels but not to groceries or most other goods.
Frequently Asked Questions
Do I pay sales tax if I buy something online in a no-sales-tax state?
It depends on where the seller is located and the seller's policies. If you buy from a company based in a no-sales-tax state, you typically will not pay sales tax. If you buy from a company based in a state with sales tax, that state may require the seller to collect sales tax from you even though you live in a no-sales-tax state. Many online retailers collect sales tax based on the buyer's address, not the seller's location.
Can I move to a no-sales-tax state to pay less tax?
Moving for tax reasons is possible but requires looking at your whole tax picture. If you earn income, you will pay income tax in most no-sales-tax states. If you own property, property taxes matter. If you are retired and live on savings, the tax structure may work differently for you. Consult a tax professional who knows both your current state and the state you are considering.
Do no-sales-tax states charge tax on groceries?
Most do not. Alaska, Delaware, and Oregon do not tax groceries. Montana taxes groceries at a lower rate than general goods. New Hampshire does not tax groceries but does tax restaurant meals. Check your specific state's rules if you are planning a move.
What if I live in a city that collects local sales tax in Alaska or Montana?
You will pay the local sales tax rate set by your city or borough on most purchases. The rate varies by location. Contact your city government or tax assessor to learn the exact rate where you live and what items are taxed.
Do these states tax services like haircuts or car repairs?
It varies. Most no-sales-tax states do not tax services, but Oregon taxes some labor and repairs. New Hampshire does not tax most services but does tax meals and hotel rooms. Check your state's tax code or contact your state revenue department for specifics on what services are taxed.