Five U.S. states have no statewide sales tax
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax. This does not mean everything you buy there is tax-free — some of these states tax specific goods like groceries or prepared food, and local taxes may still explore. If you live in one of these states or buy something from a seller there, understanding what is and is not taxed matters for your own tax return and for tracking deductible expenses.
The absence of a sales tax does not reduce your federal income tax or change what you owe the IRS. It does affect what you pay when you shop, and it can change how you track business expenses if you are self-employed or run a small business. It also matters if you are buying something online from a seller in one of these states — the tax rules depend on where you live and where the seller is located, not just where the item ships from.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, but some tax specific items like groceries or alcohol.
- Local sales taxes still explore in parts of Alaska and Montana even though the state does not charge sales tax.
- If you buy something online from a no-sales-tax state, you may still owe sales tax in your own state depending on state law and the seller's location.
- For self-employed people and business owners, the absence of sales tax in these states does not change federal tax deductions — you deduct business expenses the same way regardless of state sales tax.
- New Hampshire taxes prepared food and restaurant meals but not groceries; Alaska taxes alcohol and marijuana but not most other goods.
What each no-sales-tax state actually taxes
Alaska has no statewide sales tax but taxes alcohol, marijuana, and certain other goods. Some cities and boroughs charge local sales taxes ranging from 1% to 7.5%, so what you pay depends on where in Alaska you are shopping. Groceries are not taxed statewide.
Delaware has no sales tax on anything — not groceries, not clothing, not prepared food. This is the broadest exemption of the five states. Delaware does tax gasoline and diesel fuel separately through a fuel tax, but there is no point-of-sale tax on retail purchases.
Montana has no statewide sales tax but allows cities and counties to charge local taxes. Some Montana cities charge up to 3% local sales tax. Groceries are not taxed. Prepared food and restaurant meals are taxed in some jurisdictions.
New Hampshire has no sales tax but taxes prepared food, restaurant meals, and alcohol. Groceries you buy at a store are not taxed. This distinction matters: a sandwich from a deli counter is taxed, but a loaf of bread is not.
Oregon has no sales tax on any retail purchase, including groceries and prepared food. Oregon does tax gasoline through a fuel tax separate from sales tax. Some counties have attempted to add local taxes, but Oregon state law generally prohibits them.
How online purchases work when buying from these states
If you live outside one of these five states and buy something online from a seller located there, you do not automatically avoid sales tax. Your own state's tax law determines whether you owe tax on that purchase. Most states now require online sellers to charge sales tax based on the buyer's address, regardless of where the seller is located.
The key rule is this: sales tax is based on where the buyer lives, not where the seller is. If you live in a state that charges sales tax and you buy from an Alaska or Delaware seller, that seller should charge you your state's sales tax at checkout. If they do not, your state may expect you to report and pay the tax yourself, though most individual consumers do not do this.
The exception is if you are buying something that your state does not tax. For example, if you live in a state that taxes clothing but you buy from a seller in Delaware, you still owe your state's clothing tax — Delaware's lack of a tax does not protect you from your own state's tax.
Why these states have no sales tax
These five states fund government operations through other means. Alaska uses oil revenue and a state income tax on certain types of income. Delaware relies on corporate taxes and fees. Montana, New Hampshire, and Oregon use income taxes or other revenue sources instead of sales tax.
New Hampshire notably has no income tax either, making it one of only two states with neither a sales tax nor an income tax (the other is Tennessee, which has a limited income tax on investment income only). This does not mean New Hampshire residents pay no taxes — they pay property taxes, and the state collects taxes on specific goods and services.
How this affects your federal tax return
The state you live in or where you make a purchase does not change your federal income tax filing. You report income and deductions to the IRS the same way whether you live in a no-sales-tax state or a state with 10% sales tax.
If you are self-employed or own a business, you deduct business expenses based on what you actually paid, not on what you would have paid in a different state. If you buy office supplies in Delaware for $100, you deduct $100 — not $107 or $110 based on what sales tax would have been elsewhere. The IRS does not adjust deductions based on state tax rates.
One exception: if you itemize deductions on your federal return, you can deduct state and local taxes paid, including sales tax. However, this deduction is capped at $10,000 per year total (including income tax, property tax, and sales tax combined). If you live in a no-sales-tax state, you straightforward have less to deduct in this category, but it does not change your federal tax calculation otherwise.
State income tax in these five states
Having no sales tax does not mean these states have no income tax. Four of the five charge income tax on wages and investment income. Only New Hampshire has no income tax (though it taxes interest and dividends at 5%).
| State | Sales Tax | Income Tax |
|---|---|---|
| Alaska | None (statewide) | None |
| Delaware | None | Yes, up to 6.6% |
| Montana | None (statewide) | Yes, up to 6.9% |
| New Hampshire | None | None on wages; 5% on interest and dividends |
| Oregon | None | Yes, up to 9.9% |
If you are considering moving to one of these states for tax reasons, remember that the absence of sales tax is only one piece of the picture. You need to compare income tax rates, property taxes, and other state and local taxes to understand the full tax burden.
Frequently Asked Questions
If I buy something online from Delaware, do I have to pay sales tax?
It depends on where you live. If you live in a state that charges sales tax, you owe that tax on your purchase — the seller's location in Delaware does not exempt you. The seller should charge your state's sales tax at checkout. If they do not, your state may expect you to report it, though enforcement for individual purchases is rare.
Can I avoid sales tax by having something shipped to Alaska or New Hampshire?
No. The tax is based on where you live and take possession of the item, not where it ships to. If you live in a state with sales tax and have something shipped to an address in Alaska, you still owe your state's sales tax. Deliberately using an out-of-state address to avoid tax is tax evasion.
Does living in a no-sales-tax state reduce my federal income tax?
No. Your federal tax return is the same regardless of what state sales tax you pay. The only federal benefit is if you itemize deductions — then you can deduct state and local taxes paid, but the deduction is capped at $10,000 per year total and applies to income tax, property tax, and sales tax combined.
Why does Alaska have no income tax but Montana does?
Each state chooses its own tax structure. Alaska funds government largely through oil revenue and does not need an income tax. Montana chose to use income tax instead of sales tax. There is no rule that says states without sales tax must also have no income tax.
If I am self-employed in Oregon, do I pay less federal tax because there is no sales tax?
No. You deduct business expenses based on what you paid, not on what you would have paid in a different state. Oregon's lack of sales tax does not change your federal deductions or your federal tax bill.