Five states have no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. This means when you buy something in a store or online from a retailer located in one of these states, you will not pay sales tax on the purchase at checkout.
However, the absence of a statewide sales tax does not mean these states are tax-free everywhere. 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, making them the only truly sales-tax-free states in the country.
If you live in one of these states, you still pay taxes — they are just collected differently. New Hampshire and Montana rely heavily on income tax. Alaska has no income tax but funds itself through oil revenue and other sources. Delaware and Oregon use income tax and other revenue streams.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, but Alaska allows local sales taxes in some cities.
- Delaware, Montana, New Hampshire, and Oregon have neither statewide nor local sales taxes.
- The absence of sales tax does not mean these states are cheaper overall — they fund government through income tax, property tax, or other sources.
- If you buy something online from a retailer in a no-sales-tax state, you may still owe sales tax to your own state depending on where you live.
How online purchases work if you live in a no-sales-tax state
When you order something online from a retailer located in Alaska, Delaware, Montana, New Hampshire, or Oregon, you typically will not pay sales tax at checkout — even if the retailer ships to you in another state. The tax rule depends on where the seller is located and where you live, not where the item ships from.
If you live in a state that has sales tax, you may owe "use tax" on items you buy from out-of-state retailers. Use tax is a tax on purchases you make outside your state and bring into it. Most states require you to pay it, but few people do, and enforcement is rare for individual purchases. Large online retailers like Amazon now collect sales tax in most states regardless of where they are based, so this matters less than it once did.
If you live in one of the five no-sales-tax states and buy from a retailer in another state, you will not owe sales tax in your home state because your state does not have one.
Why some states have no sales tax
Each of these five states made a deliberate choice not to use sales tax as a revenue source. The reasons vary by state and by era.
Alaska has no income tax and no statewide sales tax. It funds state government largely through oil and gas revenue, which has been substantial but also volatile. Some Alaskan cities and boroughs do charge local sales taxes to fund schools and services.
Delaware has no sales tax partly because it is a small state with a large financial and corporate sector. Corporations pay franchise taxes and other fees that generate revenue. Delaware also has no income tax on retirement income, which attracts retirees and wealthy individuals.
Montana, New Hampshire, and Oregon each chose not to use sales tax, relying instead on income tax and property tax. Montana and Oregon also tax specific goods like gasoline and cigarettes at higher rates than other states.
How these states fund schools and services without sales tax
States without sales tax must raise money another way. The most common replacement is income tax — a tax on wages and salaries.
New Hampshire and Montana both have income tax. New Hampshire taxes only interest and dividend income, not wages, which is unusual. Montana taxes all income. Oregon taxes all income as well.
Alaska and Delaware have no income tax. Alaska relies on oil revenue and other sources. Delaware relies on corporate taxes, franchise fees, and property tax. Both states also allow local governments to charge sales tax in some areas, which provides additional revenue.
All five states also charge property tax, excise taxes on gasoline and cigarettes, and various licensing and permit fees. The mix of these taxes is what replaces the revenue a sales tax would bring.
What this means if you are thinking about moving
The absence of sales tax can make a state seem cheaper, but the total tax burden depends on your income, property value, and spending habits. A state with no sales tax but high income tax may cost you more than a state with sales tax but no income tax.
If you earn a high income, New Hampshire and Alaska (which have no income tax) may be cheaper than Oregon or Montana (which do). If you own property, property tax rates matter as much as sales tax. If you spend a lot but earn little, a state with sales tax but low income tax might be better for you than a state with income tax but no sales tax.
Tax burden also depends on what you buy. If you purchase a lot of groceries, some states exempt food from sales tax, which lowers your total. If you buy cars, property tax on vehicles varies widely by state.
States with very low sales tax (close alternatives)
If you cannot move to a no-sales-tax state but want a low sales tax, a few states charge less than 5 percent statewide. Colorado, Georgia, Hawaii, Louisiana, and Wyoming all have statewide sales taxes of 4 percent or lower. These are the lowest rates in the country outside the five states with no sales tax.
Keep in mind that statewide rate is not the full story. Local sales taxes stack on top of the state rate in most places. A state with a 4 percent statewide rate might have a combined rate of 7 or 8 percent in some cities. Check the combined rate for the specific city or county where you plan to live.
Frequently Asked Questions
Do I have to pay sales tax if I buy something online from a no-sales-tax state?
Not if you live in one of those five states. If you live in a state with sales tax, you typically will not pay it at checkout when buying from a no-sales-tax retailer, but you may owe use tax to your own state. Most states do not enforce use tax on individual purchases, so most people do not pay it.
Can I claim I live in a no-sales-tax state to avoid sales tax?
No. Sales tax is based on where you actually live and where the seller is located, not where you claim to live. Lying about your address to avoid sales tax is tax fraud. Retailers verify addresses through billing information and shipping addresses.
Does Alaska really have no taxes at all?
Alaska has no statewide income tax or statewide sales tax, but it is not tax-free. Residents pay property tax, and some cities and boroughs charge local sales taxes. Alaska also taxes gasoline, cigarettes, and alcohol at higher rates than many states. The state funds itself largely through oil revenue.
Which no-sales-tax state is cheapest to live in overall?
That depends on your income and what you own. Alaska and New Hampshire have no income tax, which is good if you earn a lot. Montana and Oregon have income tax but no sales tax. Delaware has no income or sales tax but is small and expensive in some areas. Compare property tax, income tax, and your expected spending in each state to find the cheapest for your situation.
If I move to a no-sales-tax state, when do I stop paying sales tax?
You stop paying sales tax in your new state once you establish residency there. Residency is usually based on where you have a driver's license, where you register your car, and where you claim to live on tax forms. The exact rules vary by state, but generally you are considered a resident once you move and update your address with the state.