Five states charge no sales tax at all
Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a statewide sales tax. If you live in one of these states, you will not see a sales tax line on your receipt at a grocery store, gas station, or clothing retailer. This is a permanent feature of how these states fund themselves, not a temporary exemption or special status.
However, the absence of statewide sales tax does not mean you pay nothing extra. Alaska allows municipalities to charge local sales taxes, and some do. Delaware, Montana, New Hampshire, and Oregon have no local sales tax either, so residents in those states genuinely avoid sales tax on most purchases. The practical effect is that the price on the shelf is the price you pay.
If you are moving to or from one of these states, or comparing the true cost of living, this difference matters. A $100 item costs $100 in Oregon but might cost $107 to $110 in a state with combined state and local sales tax rates between 7 and 10 percent.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though Alaska permits local sales taxes in some cities.
- Delaware, Montana, New Hampshire, and Oregon have no local sales tax either, so the shelf price is your final price in those states.
- The other 45 states all charge sales tax, though the rate and what items are taxed vary widely by state and sometimes by county.
- Some states exempt groceries, prescription medications, or clothing from sales tax even though they tax other goods.
How the five no-tax states fund government services
States without sales tax must raise revenue through other means. New Hampshire relies heavily on a tax on business profits and a tax on interest and dividends — not on wages. Alaska uses oil revenue and a small tax on businesses. Montana, Oregon, and Delaware all use income tax instead, meaning residents pay state income tax but no sales tax.
This trade-off is important to understand. A person earning $50,000 per year in Oregon pays Oregon income tax on that $50,000. The same person in a state with no income tax but a 7 percent sales tax would pay nothing to the state on their wages but would pay 7 percent on everything they buy. Which is cheaper depends on how much you earn versus how much you spend.
New Hampshire is the exception: it has neither income tax nor sales tax, but it does tax investment income and business profits. This means wage earners in New Hampshire pay less state tax than in most other states, which is why the state is sometimes called a tax haven for workers.
What you actually pay in states with sales tax
The 45 states that do charge sales tax set their own rates. The statewide rate ranges from 4 percent (Colorado, Georgia, Hawaii, Louisiana, New York, Wyoming) to 7.25 percent (California, Tennessee). However, most states also allow counties or cities to add local sales tax on top of the state rate.
Combined state and local rates are often much higher than the statewide number alone. In some Louisiana parishes, the combined rate exceeds 10 percent. In parts of California, it reaches 8.625 percent. In Tennessee, it can reach 9.55 percent. A state with a 4 percent statewide rate might have combined rates ranging from 4 percent in one county to 7 percent in another, depending on local taxes.
Many states also exempt certain items from sales tax. Groceries are not taxed in most states, though the definition of "groceries" varies — prepared food is usually taxed, but raw ingredients are not. Prescription medications are exempt in all states. Some states do not tax clothing, and a few do not tax medical equipment. These exemptions reduce the effective tax rate for people who spend heavily on these categories.
How to find the sales tax rate where you live or are moving
Your state's department of revenue website lists the statewide rate and explains what is and is not taxed. If you need the combined rate for your specific county or city, the same website usually has a lookup tool or a table by location. Some states' revenue departments also publish lists of what items are exempt.
If you are shopping online, the sales tax you owe depends on where the seller is located and where you live, not on the website's location. Federal law changed in 2018 to require online retailers to collect sales tax based on the buyer's address in most states. This means you will see sales tax added at checkout even if you are buying from a company in another state.
The one exception is if you buy from a seller in one of the five no-tax states and have it shipped to your home in that same state, you will not pay sales tax. If you buy from a seller in Oregon and have it shipped to California, you will pay California sales tax.
Sales tax on specific purchases: groceries, gas, and services
Groceries are not taxed in 32 states. In the remaining 18 states, groceries are either fully taxed or taxed at a reduced rate. For example, Illinois taxes groceries at 1 percent instead of the full 6.25 percent state rate. South Carolina taxes groceries at 2.5 percent. If you buy $200 in groceries per week, the difference between a state that taxes groceries and one that does not adds up quickly.
Gasoline is taxed in all states, but the tax is usually a per-gallon excise tax rather than a sales tax percentage. This tax funds road maintenance and is separate from sales tax. Some states add sales tax on top of the per-gallon tax, while others do not. The total tax on a gallon of gas can range from under 30 cents to over 60 cents depending on the state.
Services — haircuts, car repairs, plumbing, accounting — are taxed in some states and not in others. Most states do not tax services, but some do. If you live in a state that taxes services, you will pay sales tax on a $100 haircut. In a state that does not, you will not. This is one reason why the same service can appear more expensive in one state than another.
Moving to a no-tax state: what changes and what does not
If you move from a high-tax state to one of the five no-tax states, your take-home pay will be higher because you will not pay state income tax. However, you may pay more in property tax or other local taxes. States without income tax often rely on property tax to fund schools and local services, so your property tax bill might be higher than in your previous state.
The sales tax savings are real but should not be the only factor in a move. A person earning $60,000 per year in California pays about $2,500 in state income tax. That same person in Oregon would pay $0 in state income tax but would pay Oregon income tax instead — wait, Oregon does have income tax. The comparison is complex because each state's tax structure is different.
If you are considering a move partly for tax reasons, use your state's revenue department website and a tax calculator to estimate your actual tax bill in both states. Include income tax, sales tax, property tax, and any other state or local taxes. The total picture matters more than any single tax.
Frequently Asked Questions
Do I have to pay sales tax if I buy something online from a no-tax state?
It depends on where you live. If you live in one of the five no-tax states and buy from a seller in that same state, you will not pay sales tax. If you live in a state with sales tax and buy from a seller in a no-tax state, you will still owe sales tax based on your home state's rate. Most online retailers now collect this tax at checkout automatically.
Can I avoid sales tax by driving to a no-tax state to shop?
No. Sales tax is based on where you live, not where you make the purchase. If you live in California and drive to Oregon to buy something, you technically owe California sales tax on that purchase. However, enforcement is difficult for in-person purchases, and most states do not actively pursue this. The rule exists mainly to prevent businesses from relocating to avoid tax.
Does New Hampshire really have no income tax or sales tax?
New Hampshire has no income tax on wages and no sales tax, but it does tax business profits and investment income (interest and dividends). For a wage earner with no significant investment income, New Hampshire is effectively a no-tax state. For a business owner or investor, the tax burden is higher.
If I move to Alaska, do I pay sales tax?
Alaska has no statewide sales tax, but some cities and boroughs charge local sales tax. Anchorage does not, but Juneau does. Check with your specific city or borough to find out whether local sales tax applies where you are moving.
Are there any other states considering eliminating sales tax?
No state has eliminated sales tax in recent decades. Some states periodically debate tax reform, but eliminating sales tax would require replacing that revenue with income tax or property tax, which is politically difficult. The five no-tax states have had their current systems in place for many years.