Five states have no statewide sales tax
Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge a statewide sales tax on purchases. This means when you buy something in these states, you pay only the price on the tag — no additional tax is added at checkout.
However, the story is more complicated than it first appears. Alaska allows cities and boroughs to charge local sales taxes, so some purchases in Alaska do have tax added. Delaware, Montana, New Hampshire, and Oregon have no local sales taxes either, making them the only truly tax-free states for most purchases.
The other 45 states and Washington, D.C. all charge some form of statewide sales tax. Those rates vary widely — from 2.9% in Colorado to 7.25% in California, and some states add local taxes on top of the state rate.
Key Takeaways
- Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though Alaska allows local taxes in some cities.
- Even in no-sales-tax states, certain items like groceries, medicine, or clothing may be taxed differently than in other states, or not taxed at all.
- If you live in a state with sales tax and buy from an online seller in a no-tax state, you may still owe tax depending on your state's rules and the seller's location.
- States without sales tax often fund government services through other taxes, such as income tax or property tax.
What items are taxed differently in no-sales-tax states
States without sales tax often have different rules for specific categories of goods. In New Hampshire, for example, most items are not taxed, but prepared food and restaurant meals are subject to an 8.5% tax. This means a sandwich you buy at a deli counter is taxed, but groceries you buy to cook at home are not.
Montana does not tax groceries, clothing, or most services, but it does tax certain items like gasoline and cigarettes at different rates than other states. Oregon does not tax groceries or clothing either, but it does tax some services and prepared foods.
Delaware taxes very few items — groceries and most clothing are not taxed — but it does tax certain services and prepared foods. Alaska's rules vary by municipality, so what is taxed in Anchorage may differ from what is taxed in Juneau.
If you are moving to or shopping in one of these states, check the specific rules for the items you buy most often. The lack of a statewide sales tax does not mean nothing is ever taxed.
How no-sales-tax states fund government services
States that do not charge sales tax must raise money for schools, roads, and public services through other sources. Most rely heavily on income tax — the tax taken from your paycheck or owed when you file your tax return.
New Hampshire and Tennessee are unusual: they have no income tax and no sales tax. New Hampshire funds state services primarily through property taxes, meals and rooms taxes (charged to hotels and restaurants), and taxes on business income. Tennessee recently eliminated its income tax but relies on sales tax, so it does not fit the no-sales-tax category.
Alaska has no income tax and no statewide sales tax. Instead, it funds services through oil revenues and corporate taxes. Montana and Oregon both charge income tax to residents, which is how they replace the revenue a sales tax would bring.
Delaware charges income tax and also taxes corporate profits at a higher rate than many states. This is one reason Delaware is popular for business registration — the tax structure is different from other states.
Online purchases and sales tax in no-tax states
If you live in a state with sales tax and buy something online from a seller in Alaska, Delaware, Montana, New Hampshire, or Oregon, you may still owe tax. The rule depends on where you live, not where the seller is located.
Most states now require online sellers to collect sales tax on purchases made by residents of that state, even if the seller is in another state or country. This is true whether the seller is in a no-sales-tax state or anywhere else. When you check out, the seller should charge you the sales tax rate for your state and city.
If you buy from a small seller who does not collect tax, your state may ask you to report the purchase and pay "use tax" when you file your state tax return. Use tax is the same rate as sales tax and applies to items you bought out of state but use in your home state. In practice, few individuals report use tax, but the obligation exists in most states.
Moving to a no-sales-tax state
If you are considering a move to one of these states for tax reasons, remember that the lack of sales tax is only one part of the tax picture. You need to look at income tax, property tax, and other state and local taxes together.
New Hampshire and Alaska have no income tax, which can mean significant savings if you earn a high income. However, New Hampshire's property taxes are among the highest in the nation, and Alaska's cost of living is very high in many areas. Montana and Oregon both charge income tax, so the savings from no sales tax may be offset by what you pay in income tax.
Delaware has no sales tax but does charge income tax. However, Delaware's income tax rates are relatively low, and the state is popular with people who work remotely or own businesses because of its tax structure and business-friendly laws.
Before moving, calculate your total tax burden in both your current state and the state you are considering. Sales tax is only one piece of the puzzle.
How sales tax rates compare across states
The 45 states that do charge sales tax have rates that range from 2.9% to 7.25% at the state level. Colorado has the lowest statewide rate at 2.9%, and California has the highest at 7.25%. However, many states allow cities and counties to add local sales taxes on top of the state rate.
When you add local taxes, the total sales tax rate can be much higher. For example, Louisiana's state sales tax is 4.45%, but some cities add local taxes that bring the total to over 10%. Tennessee's state rate is 9.55%, one of the highest in the nation.
The following table shows how the no-sales-tax states compare to a few examples of high-tax and low-tax states:
| State | Statewide Sales Tax Rate | Typical Total with Local Tax |
|---|---|---|
| Alaska | None | 0% to 7.5% (varies by city) |
| Delaware | None | None |
| Montana | None | None |
| New Hampshire | None | None (except prepared food) |
| Oregon | None | None |
| Colorado | 2.9% | 4% to 8% |
| California | 7.25% | 7.25% to 10.75% |
| Tennessee | 9.55% | 9.55% to 9.75% |
Frequently Asked Questions
Do I pay sales tax on groceries in no-sales-tax states?
In most no-sales-tax states, groceries are not taxed. New Hampshire, Montana, Oregon, and Delaware all exempt unprepared food from tax. Alaska's rules vary by municipality. However, prepared food — like restaurant meals, deli sandwiches, or hot food from a grocery store — may be taxed even in these states.
Can I save money by shopping online in a no-sales-tax state?
Not if you live in another state. Most online sellers now collect sales tax based on where you live, not where they are located. If the seller does not collect tax, your state may require you to pay use tax on your tax return. Shopping in a no-tax state only saves you money if you physically travel there and make the purchase in person.
Why do some states have no sales tax?
States without sales tax fund government services through other sources, primarily income tax, property tax, or natural resource revenues. New Hampshire and Alaska have no income tax, so they rely on property taxes, business taxes, or other revenue sources. The choice reflects each state's history and political decisions about how to fund public services.
Is New Hampshire really a no-tax state?
New Hampshire has no sales tax and no income tax, but it is not completely tax-free. It charges property taxes, which are among the highest in the nation. It also taxes prepared food and lodging. So while New Hampshire has low taxes on income and purchases, residents pay through property taxes instead.
What happens if I move from a sales-tax state to a no-sales-tax state?
You will pay no sales tax on purchases in your new state, but you may pay more in income tax or property tax depending on which state you move to. Calculate your total tax burden before moving — the lack of sales tax does not always mean lower overall taxes.