Five States With No Sales Tax or Income Tax

Which states charge neither sales tax nor income tax

Five states have no sales tax and no income tax: Alaska, Florida, Nevada, South Dakota, and Wyoming. These are the only states where you pay neither tax when you buy something at a store nor when you earn wages or investment income.

This does not mean these states collect no tax at all. They fund schools, roads, and services through other sources: Alaska uses oil revenue, while the others rely on business taxes, property taxes, hotel taxes, or taxes on specific goods like fuel and alcohol. But if you live in one of these five states, you will not see a sales tax added at checkout or file a state income tax return.

Two additional states — Montana and New Hampshire — have no sales tax, though they do tax income. If you are looking specifically for no sales tax, those two are worth knowing about, but they do not meet the "neither tax" standard.

Key Takeaways

• Alaska, Florida, Nevada, South Dakota, and Wyoming are the only five states with no sales tax and no state income tax.
• These states fund government services through other taxes, such as business taxes, property taxes, fuel taxes, and in Alaska's case, oil revenue.
• Montana and New Hampshire have no sales tax but do tax income, so they are not tax-free on both fronts.
• Moving to a no-tax state can lower your overall tax burden, but you should also consider property taxes, cost of living, and other state-specific expenses.

Alaska: Oil revenue and no income tax

Alaska has no sales tax and no state income tax. The state funds itself largely through oil production revenue and a small business tax. Because Alaska's oil wealth is substantial, residents do not face the income tax burden that most other states impose.

Alaska does charge local sales taxes in some cities and boroughs — these range from 0% to around 7.5% depending on where you live within the state. So while there is no statewide sales tax, you may still pay sales tax at the local level. Property taxes in Alaska are also relatively low compared to other states.

Florida: No income tax, sales tax only

Florida has no state income tax but does charge a 6% statewide sales tax. Counties can add their own local sales tax on top of this, bringing the total to between 6% and 7.5% depending on location. So while you will not pay income tax on wages or investments, you will see sales tax at the register.

Florida funds schools and state services through sales tax revenue, corporate taxes, and property taxes. This structure makes Florida attractive to retirees and high-income earners who want to avoid state income tax, even though they will pay sales tax on purchases.

Nevada: Gambling taxes and no income tax

Nevada has no state income tax and no statewide sales tax, though counties do charge local sales taxes ranging from 6% to 8.375%. The state relies heavily on taxes from casinos and gaming operations, which generate substantial revenue without burdening individual wage earners.

Nevada also charges taxes on fuel, alcohol, and other specific goods. Property taxes are moderate. The combination of gaming revenue and these targeted taxes allows Nevada to operate without an income tax or statewide sales tax.

South Dakota: No income tax, low sales tax

South Dakota has no state income tax and a 4.5% statewide sales tax — one of the lowest in the nation. Counties can add local sales tax, bringing totals to between 4.5% and 6.5% depending on where you shop. South Dakota also does not tax retirement income, which makes it popular with retirees.

The state funds itself through sales tax, property taxes, and taxes on specific items like fuel and alcohol. South Dakota's low sales tax combined with no income tax creates a relatively light overall tax burden compared to most states.

Wyoming: No income tax, no statewide sales tax

Wyoming has no state income tax and no statewide sales tax, though some counties and cities charge local sales taxes ranging from 0% to 6%. The state funds itself through taxes on minerals (especially oil and coal), property taxes, and excise taxes on fuel and alcohol.

Wyoming's mineral wealth, like Alaska's oil, allows the state to avoid both income and sales taxes at the state level. However, property taxes can be significant in some areas, so the overall tax picture depends on where in Wyoming you live and what property you own.

How these states compare to high-tax states

States with no income tax or sales tax stand in sharp contrast to states that charge both. For example, California charges a state income tax of up to 13.3% plus a sales tax of 7.25% to 10.75%. New York charges income tax up to 10.9% plus sales tax of 4% to 8.875%. Someone earning $100,000 per year will pay thousands of dollars less in state taxes in Alaska, Florida, Nevada, South Dakota, or Wyoming than in a high-tax state.

However, the total tax burden depends on more than just income and sales taxes. Property taxes, fuel taxes, and the cost of living vary widely. A state with no income tax might have high property taxes or expensive housing. Before moving for tax reasons, compare the full picture: income tax, sales tax, property tax, housing costs, and the cost of goods and services in your target state.

Frequently Asked Questions

Do any of these five states charge property tax?

Yes, all five charge property tax, though rates vary. Alaska and Wyoming have relatively low property taxes, while Florida and Nevada are moderate. South Dakota's property taxes are also moderate. Property tax is often the largest tax bill for homeowners in these states, so research your specific county before moving.

Can I move to one of these states just to avoid taxes?

You can move for any reason, but tax residency matters. Most states consider you a resident if you live there for more than half the year or establish a permanent home there. straightforward owning property or claiming a mailing address may not be enough. If you move to avoid taxes, be prepared to actually live there and establish genuine residency.

Do these states tax retirement income or Social Security?

None of these five states tax Social Security benefits. South Dakota and Wyoming do not tax retirement income at all. Alaska, Florida, and Nevada also do not tax retirement income. This makes all five attractive to retirees, though you should still check local property taxes and cost of living.

What about federal taxes — do these states avoid those?

No. State income tax and federal income tax are separate. Even if you live in a state with no income tax, you still owe federal income tax to the IRS. These five states only eliminate the state portion of income tax, not the federal portion.

Are there any downsides to living in a no-tax state?

The main trade-off is that these states often fund services through other means — higher sales taxes, property taxes, or taxes on specific goods. Some have higher costs of living or less developed public services in certain areas. Research the specific county and city where you plan to live, because tax rates and service quality vary within each state.