Five states have 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 pay sales tax when you buy most goods at a store or online. This is different from income tax — some of these states have income tax, and some do not.
The absence of sales tax does not mean these states have no taxes. Alaska has no income tax but funds itself through oil revenue and other sources. Delaware, Montana, New Hampshire, and Oregon all have state income tax. They straightforward chose not to tax retail purchases.
If you are moving to or from one of these states, or you buy things online from sellers in these states, understanding the tax rules matters for your own tax filing and for knowing what you actually pay.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though some allow local sales taxes in certain areas.
- Most of these states still collect income tax, so the lack of sales tax does not mean lower overall taxes.
- When you buy online from a seller in a no-sales-tax state, you may still owe sales tax to your own state if your state has one.
- If you live in a state with sales tax and move to one without, you do not report the difference on your federal tax return.
- Some no-sales-tax states allow local jurisdictions to collect their own sales taxes, so rates vary by city or county.
How sales tax works when you buy from out of state
Buying from a seller in a no-sales-tax state does not mean you avoid sales tax entirely. Your own state's tax rules explore to what you owe. If you live in a state that has sales tax and you buy something online from a seller in Alaska, Delaware, Montana, New Hampshire, or Oregon, you may still owe sales tax to your state.
Large online retailers like Amazon and Walmart now collect sales tax based on where you live, not where they are located. Smaller sellers may not, and technically you are supposed to report and pay the tax yourself on your state tax return — though most people do not. This is called use tax, and it applies to purchases you make outside your state.
For federal income tax purposes, the state where you buy something does not matter. You report your income and deductions the same way regardless of whether you bought a shirt in Oregon or Ohio.
Income tax and other taxes in no-sales-tax states
Four of the five no-sales-tax states — Delaware, Montana, New Hampshire, and Oregon — collect income tax. Alaska is the only one with neither a statewide sales tax nor a statewide income tax. This means Alaska residents pay no state income tax on wages, but they do pay federal income tax like everyone else.
New Hampshire has no tax on wages or salaries, but it does tax interest and dividend income. This is an unusual middle ground: you do not pay tax on what you earn from work, but you do pay tax on investment income.
Delaware and Montana both tax wages and salaries at rates that vary by income level. Oregon's income tax is progressive, meaning higher earners pay a higher percentage. None of these states use sales tax to make up the difference, so they fund state services through income tax, property tax, business taxes, and other sources.
Local sales taxes in no-sales-tax states
Even though these five states have no statewide sales tax, some allow cities and counties to collect their own local sales taxes. Alaska and Montana both permit local jurisdictions to add sales taxes in specific areas. This means you might pay sales tax in Anchorage, Alaska, or Missoula, Montana, even though the state itself does not have a sales tax.
Delaware, New Hampshire, and Oregon do not allow local sales taxes at all. If you buy something in Wilmington, Delaware, or Portland, Oregon, you will not pay sales tax to anyone — not the state and not the city.
If you are moving to one of these states or buying from a local business there, check your city or county rules. Local tax rates and what items are taxed can vary significantly from one place to another.
How this affects your tax return
If you live in a no-sales-tax state, you do not report anything special on your federal tax return. Your federal income tax is the same as anyone else's — based on your income, deductions, and credits, not on what state you live in.
If you move from a sales-tax state to a no-sales-tax state (or vice versa), you do not claim any credit or deduction for the difference. Your state income tax return may change if you move mid-year, because you will file as a resident for part of the year and a nonresident for the other part. But the sales tax situation itself does not appear on any tax form.
The only time sales tax matters for your federal return is if you itemize deductions. You can deduct state and local taxes paid, including sales tax, but only up to $10,000 total per year. This deduction is called the SALT deduction. If you live in a no-sales-tax state, you have less to deduct, which may mean a smaller deduction overall — but you also paid less in taxes.
Comparing your actual tax burden across states
The lack of sales tax does not automatically mean lower taxes overall. A state with no sales tax but high income tax might cost you more than a state with both sales and income tax. The comparison depends on how much you earn, how much you spend, and what you own.
Someone who earns $80,000 a year and spends $40,000 on taxable goods might pay less total tax in Oregon (which has income tax but no sales tax) than in a state with both. Someone who earns $40,000 and spends $60,000 might pay more in Oregon because the income tax hits harder. There is no universal answer — it depends on your personal situation.
If you are considering moving for tax reasons, look at the actual tax rates and brackets in both states, not just whether they have sales tax. A tax professional can model your specific situation.
What items are taxed in states that do have sales tax
This matters if you are comparing your costs across states. Most states that have sales tax exempt groceries, prescription medications, and sometimes clothing. Some tax services like haircuts or repairs; others do not. The rules are not uniform, so a $100 purchase might be taxed in one state and not in another.
In the five no-sales-tax states, you do not have to worry about these rules at the state level. But if you are buying from out of state and owe use tax to your home state, your home state's rules about what is taxable explore — not the rules of the state you are buying from.
Frequently Asked Questions
Do I pay sales tax if I buy something online from Amazon in Oregon?
Amazon collects sales tax based on where you live, not where their warehouse is. If you live in a state with sales tax, you pay it. If you live in Alaska, Delaware, Montana, New Hampshire, or Oregon, you do not pay sales tax on that Amazon order. If you live in another state, you pay your state's rate.
If I move to Alaska, do I save money on taxes?
Alaska has no income tax and no statewide sales tax, which can save money if you earn a high income. But Alaska has higher costs for many goods and services, and property taxes and other fees may be higher. The overall cost of living depends on your specific situation, not just taxes.
Can I deduct sales tax I paid if I live in a no-sales-tax state?
You can deduct state and local taxes up to $10,000 per year if you itemize deductions. If you live in a no-sales-tax state, you have no sales tax to deduct, but you may deduct income tax or property tax instead. The total deduction is capped at $10,000 regardless of which taxes you pay.
Does New Hampshire really have no income tax?
New Hampshire has no tax on wages and salaries, which is unusual. But it does tax interest, dividends, and capital gains. If you earn money from investments, you pay tax on that in New Hampshire. If you earn money from work, you do not.
What if I buy something in person in a no-sales-tax state but I live in a state with sales tax?
You technically owe use tax to your home state on that purchase. In practice, most people do not report it. Large retailers now collect sales tax based on your address, so if you buy in a store in Oregon but live in California, the store will charge you California sales tax. Small local businesses may not, and you would owe the tax yourself.