Which States Have No Sales Tax and How That Affects Your Purchases

Five states have no sales tax at all

Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. If you live in or buy from a business in one of these states, you will not pay sales tax on most purchases at checkout. This is the simplest sales tax situation in the country — no tax to calculate, no exceptions to learn, no local add-ons to track.

However, "no sales tax" does not mean these states collect zero tax on purchases. Some of them tax specific goods or services differently, or they fund state operations through other taxes instead. Understanding what is and is not taxed in each state matters if you live there or order items to be shipped there.

Key Takeaways

• Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax on retail purchases.
• Some of these states tax specific items like groceries, alcohol, or prepared food even though they have no general sales tax.
• If you order something online to be shipped to a no-sales-tax state, you typically will not pay sales tax unless the seller is based in that state.
• These states fund government services through income tax, property tax, or other revenue sources instead of sales tax.

What each no-sales-tax state actually taxes

Alaska has no state sales tax, but some cities and boroughs charge local sales tax ranging from 1% to 7.5%. Groceries are not taxed. Alcohol and fuel are taxed at higher rates than other goods.

Delaware has no sales tax on anything, including groceries, clothing, and prepared food. This applies statewide with no local exceptions. Delaware funds state operations through corporate income tax and other sources.

Montana has no sales tax on most purchases, but it taxes lodging (hotel rooms), rental cars, and some prepared foods. Groceries are not taxed. Some cities do not tax groceries or certain services.

New Hampshire has no sales tax on most items, including clothing and groceries. It does tax prepared food, restaurant meals, and alcohol. New Hampshire funds state operations through a "meals and rooms" tax (8% on hotel rooms and restaurant food) and a business profits tax.

Oregon has no sales tax on any retail purchase, including groceries and clothing. However, it taxes lodging and rental cars. Oregon funds state operations through income tax.

How no-sales-tax states affect online shopping

When you order something online to be shipped to a no-sales-tax state, whether you pay sales tax depends on where the seller is located and their business structure. If the seller has a physical location or warehouse in Alaska, Delaware, Montana, New Hampshire, or Oregon, they must collect sales tax according to that state's rules — even if the state has no general sales tax.

If the seller is based outside the no-sales-tax state and has no physical presence there, they typically do not collect sales tax on your order. This is why some people order items to be shipped to Delaware or Oregon to avoid sales tax, though this only works if the seller does not have a location in your home state.

Some large online retailers collect sales tax in every state regardless of where they are based, as a business practice. Check the seller's tax policy or your receipt to see what was charged.

Why these states have no sales tax

States without sales tax fund government operations through other revenue sources. Oregon and New Hampshire rely heavily on income tax. Alaska has no income tax either and funds operations through oil revenue and other sources. Delaware has no income tax but collects corporate income tax and business-related fees. Montana uses income tax and property tax.

The choice to have no sales tax is a state policy decision, not a legal requirement. Some states decided long ago that sales tax was not the right funding mechanism, and changing that policy would require legislative action. Other states have kept sales tax because it is a stable, broad-based revenue source.

Moving to or doing business in a no-sales-tax state

If you move to one of these states, your overall tax burden depends on what other taxes explore. A state with no sales tax but high income tax may not save you money compared to a state with both sales tax and income tax. Compare your total tax situation — income tax rate, property tax rate, and any local taxes — rather than focusing on sales tax alone.

If you run a business and ship products to customers in these states, you must follow each state's specific rules about what is taxed. For example, if you sell prepared food to customers in New Hampshire, you must collect the meals tax. If you sell groceries to customers in Montana, you do not. Consult a tax professional or the state revenue department for your specific product and business model.

States with very low sales tax as an alternative

If you are looking for low-tax states but do not live in one of the five with no sales tax, some states have sales tax rates below 5%. These include Colorado (4.63%), Georgia (4%), Hawaii (4%), Louisiana (4.45%), and Wyoming (4%). These states still charge sales tax, but at lower rates than the national average of around 7%.

Keep in mind that "low sales tax" does not account for other taxes. A state with 4% sales tax but 10% income tax may cost you more overall than a state with 7% sales tax and 5% income tax. Your actual tax burden depends on your income, spending, property ownership, and other factors specific to your situation.

Frequently Asked Questions

Do I have to pay sales tax if I buy something in person in a no-sales-tax state?

Not on the item itself, unless that state taxes that specific product. For example, if you buy groceries in Oregon, you pay no sales tax. If you buy a hotel room in Oregon, you pay the lodging tax. Check what the state taxes before you assume there is no tax at all.

Can I order online to a no-sales-tax state to avoid paying sales tax?

Only if the seller does not have a business location in your home state. If the seller is based in your state or has a warehouse there, they must collect your state's sales tax regardless of where you ship the order. Many large retailers collect sales tax everywhere anyway.

If I move to Alaska or New Hampshire, will I pay no income tax either?

Alaska has no state income tax. New Hampshire has no income tax on wages but does tax interest and dividend income. Both states fund operations through other revenue sources, so moving there does not mean paying zero state tax overall.

What happens if a business in a no-sales-tax state ships to me in a state that has sales tax?

You typically pay your home state's sales tax, not the seller's state tax. The seller collects tax based on where the item is being shipped. If you live in a state with sales tax and order from a seller in Oregon, you still pay your state's sales tax on that order.

Are groceries taxed in any of the no-sales-tax states?

Groceries are not taxed in Alaska, Delaware, Montana, or Oregon. New Hampshire does not tax groceries either, but it does tax prepared food and restaurant meals. If you are buying raw ingredients to cook at home, you pay no tax in all five states.