What States Have 0 Sales Tax? A Complete Guide for Savvy Shoppers and Businesses

Shopping without sales tax may sound like a dream, but for residents and visitors in certain U.S. states, it’s a financial reality. Whether you’re a budget-conscious consumer, a business owner looking to optimize costs, or an entrepreneur evaluating startup locations, knowing which states have 0 sales tax can lead to real savings and strategic advantages. This comprehensive guide breaks down the states with no statewide sales tax, explains how local taxes may still apply, and explores the economic implications of these tax-free environments.

Understanding Sales Tax in the United States

Before diving into the states with zero sales tax, it’s important to understand the role of sales tax in the U.S. tax system. A sales tax is a consumption tax levied on the sale of goods and services. Unlike federal income taxes, sales taxes are primarily imposed at the state and local levels, and they fund essential public services such as education, infrastructure, and healthcare.

Most states impose a statewide sales tax, and many also allow counties, cities, or other municipalities to add their own local sales taxes, leading to varying total tax rates across jurisdictions. However, a handful of states have made the bold choice to forgo a state-level sales tax entirely—either partially or completely.

States with 0 Statewide Sales Tax

Currently, five U.S. states have no statewide sales tax:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

Each of these states has taken a unique approach to taxation, substituting potential sales tax revenue with alternative funding sources such as income taxes, property taxes, tourism, or local levies. Understanding the nuances in each state’s model helps explain how they operate without a blanket sales tax.

The 5 States with No Statewide Sales Tax: A Detailed Look

1. Alaska – Local Autonomy Rules

While Alaska has no statewide sales tax, this doesn’t mean purchases are universally tax-free. Instead, Alaska delegates the authority to impose sales taxes to local municipalities. As a result, around 130 local taxing jurisdictions in Alaska—including cities, boroughs, and municipalities—levy their own sales taxes.

For example:

• Anchorage: 2% sales tax
• Fairbanks: 2%
• Juneau: No sales tax

This patchwork approach means that consumers might face a 0% rate in some areas and up to 7.5% in others. However, if you’re making large purchases in sales-tax-free zones, Alaska can still offer significant cost advantages. Additionally, Alaska does not have a state income tax, enhancing its appeal to residents and businesses.

Key Consideration: The Permanent Fund Dividend

One unique element of Alaska’s financial model is the Permanent Fund Dividend (PFD), which distributes a portion of oil revenues to eligible residents each year. This helps offset the lack of income and sales taxes, making the no-sales-tax system more sustainable.

2. Delaware – The “First State” is Tax-Friendly

Delaware has neither a state sales tax nor a local sales tax. It’s a true tax-free shopping haven at all levels. This absence of sales tax applies to nearly all retail goods, making it an attractive destination for in-person and online shopping.

What Delaware lacks in sales tax, it makes up for through:

• Corporate franchise taxes: Delaware’s business-friendly laws have made it a preferred state of incorporation for thousands of U.S. companies, generating substantial revenue through fees on businesses.
• Property taxes: Though modest, property taxes contribute to public funding.

Delaware also has no inheritance tax and relatively low property taxes, contributing to its status as a tax-advantaged state overall.

Tax-Free Shopping and Tourism Impact

Because of its strategic position along the I-95 corridor, many shoppers from neighboring states like Pennsylvania, New Jersey, and Maryland cross into Delaware for tax-free retail therapy. Major shopping centers such as Christiana Mall see an influx of out-of-state visitors, boosting local economies through retail spending—even without collecting sales tax.

3. Montana – Sales Tax-Free, But Not Always

Montana does not impose a statewide sales tax, setting it apart from the majority of U.S. states. However, Montana does have gross receipt taxes in certain resort communities. These are not officially labeled “sales taxes,” but they can function similarly.

Towns such as:

• Whitefish
• Red Lodge
• West Yellowstone

levy gross receipt taxes, typically ranging from 3% to 7%, on goods and services. These funds support local tourism infrastructure and services and are generally applied to high-traffic areas that serve many visitors.

For the average shopper outside these resort zones, Montana remains effectively sales tax-free.

E-Commerce Loophole Still Closed

Unlike many states, Montana does not require out-of-state online retailers to collect sales tax unless they have a physical presence (nexus) in the state. This means that purchases from Amazon, Walmart.com, or other online platforms may not be taxed if the retailer doesn’t have a local warehouse or office. This provision has drawn criticism but protects Montana consumers from unexpected cross-border taxation.

4. New Hampshire – A Model of Fiscal Innovation

New Hampshire is entirely free of both sales and income taxes at the state level. Like Alaska, it relies on other taxing mechanisms to fund government operations, including:

• Business enterprise tax (BET)
• Business profits tax (BPT)
• Property taxes at the municipal level
• Excise and fuel taxes

This combination allows New Hampshire to maintain a balanced budget without burdening consumers with a sales tax, positioning it as one of the most taxpayer-friendly states.

Thriving Retail and Tourism Sectors

Due to its proximity to high-tax states like Massachusetts and Connecticut, New Hampshire benefits from substantial cross-border retail spending. Major outlets along Route 3 and in Manchester, Nashua, and Salem attract shoppers looking to avoid sales tax on automobiles, clothing, and electronics.

Moreover, New Hampshire’s scenic beauty and seasonal tourism—especially in the White Mountains and along the Seacoast—generate revenue without the need for a sales tax.

5. Oregon – Prioritizing Income and Property Taxes

Oregon abolished its sales tax back in 1930 and hasn’t reinstated it since. Instead, the state relies heavily on personal income taxes and property taxes to fund government activities. Oregon has one of the highest personal income tax rates in the country, with a top marginal rate of 9.9%, but its decision to avoid sales tax remains popular among residents.

With no sales tax, Oregon is a prime shopping destination for residents of Washington, California, and Nevada. Portland and Medford regularly see cross-border shoppers, especially during holiday seasons.

Localities Can Still Tax Services

While Oregon doesn’t have a sales tax on tangible goods, some local governments impose excise taxes or service charges. For instance:

• Parking excise taxes in Portland
• Hotel occupancy taxes in tourist-heavy areas

These do not affect consumer purchases of everyday items but may influence tourism costs slightly.

Why These States Can Afford to Go Without Sales Tax

It may seem surprising that these states function without a primary revenue stream used by most of their peers. However, their fiscal policies are carefully balanced with alternative sources of income.

Tax Revenue Makeup in Tax-Free States

As shown in this table, the absence of sales tax is compensated by higher reliance on income, property, or business-related taxes. For example, New Hampshire’s effective property tax rate is among the highest in the nation, a trade-off for its lack of income and sales taxes.

Economic and Social Implications of No Sales Tax

The decision to go without a sales tax affects a state’s economy in multiple ways.

Consumer Behavior and Cross-Border Shopping

States without sales tax attract shopping tourism. Consumers from nearby high-tax states often drive across state lines to make major purchases. For instance:

• A shopper in Portland, Maine, might cross into New Hampshire to buy a car tax-free.
• A resident of Northern California might travel to southern Oregon for bulk retail shopping.

This boosts local economies and supports retail employment. However, it can also lead to resentment in bordering states that lose tax revenue to cross-border leakage.

Impact on State Budgets and Public Services

While sales taxes are a reliable source of revenue, their absence doesn’t automatically equate to underfunded services. These five states allocate budgets strategically:

• Oregon maintains quality public education despite its lack of sales tax, funded by higher income taxes.
• Delaware’s efficient corporate tax system allows it to run a surplus during strong economic years.
• Alaska leverages resource wealth to balance deficits.

Still, fluctuations in oil prices (for Alaska) or economic downturns can strain these models, requiring policy adaptability.

Business Climate and Corporate Relocations

A lack of sales tax is just one factor in broader tax competitiveness. Delaware, for example, is known for its pro-business laws and court system (Chancery Court), making it the top choice for corporate incorporation—even for companies that don’t operate physically in the state.

Similarly, New Hampshire and Oregon have attracted technology firms and small businesses seeking lower operational friction.

Myth-Busting: Does “No Sales Tax” Mean Completely Tax-Free?

While these states don’t have a statewide sales tax, several misconceptions exist:

Local Taxes Still Apply in Some Cases

Consumers should be aware that local jurisdictions may impose their own taxes even if the state does not. For example:

• Montana’s resort towns impose gross receipt taxes.
• Alaska’s cities can tack on up to 7.5% in local sales taxes.

Always check the tax rate in a city before making large purchases.

Excise Taxes and “Hidden” Costs

Even in sales tax-free states, governments generate revenue through other taxes:

• Alcohol and tobacco excise taxes
• Use taxes on out-of-state purchases
• Vehicle registration fees
• Lodging and rental car taxes

For instance, hotel occupancy taxes in places like Portland or Anchorage can be as high as 12–15%, driven by tourism.

Shopping Strategies in Sales Tax-Free States

For savvy consumers, visiting or residing in a sales tax-free state opens up strategic opportunities.

Best Items to Buy Tax-Free

Some purchases yield greater savings in states without sales tax:

• Cars and motorcycles: Sales tax on vehicles can reach 8–10% in high-tax states. Buying a car in New Hampshire or Oregon could save thousands.
• Electronics: Laptops, TVs, and smartphones can accumulate significant tax savings.
• Boats and RVs: High-ticket recreational items benefit most from tax-free purchases.
• Clothing and accessories: While some high-tax states exempt clothing under a certain price, others do not—making no-sales-tax states ideal for wardrobe upgrades.

Online Shopping Considerations

With the rise of e-commerce, knowing where a retailer is based matters. While you won’t pay sales tax when buying from a retailer located in a no-sales-tax state, many online retailers now collect sales tax based on your shipping address, due to the 2018 Supreme Court decision in South Dakota v. Wayfair.

Still, some smaller websites—especially those based in Montana or New Hampshire—may not collect sales tax from any customer, adding another layer of potential savings for alert shoppers.

State Comparisons: Tax Burden Beyond Sales Tax

A low sales tax burden doesn’t always mean a low overall tax burden. Consumers should consider the full picture:

Effective Tax Rates by State

The Tax Foundation ranks states by overall tax burden. Here’s where the no-sales-tax states fall:

• Delaware: Low overall burden (10th lowest)
• Alaska: Very low burden (3rd lowest)
• New Hampshire: Moderate burden, mainly due to high property taxes
• Oregon: Higher burden due to income tax
• Montana: Low-to-moderate burden

This shows that while avoiding sales tax is beneficial, it’s only one piece of a state’s fiscal puzzle.

Conclusion: Weighing the Benefits of 0 Sales Tax

The five states with no statewide sales tax—Alaska, Delaware, Montana, New Hampshire, and Oregon—offer compelling advantages to consumers, businesses, and policymakers. By eliminating or avoiding this regressive consumption tax, they create more attractive shopping and living environments.

However, the absence of sales tax doesn’t mean no taxes at all. These states compensate with higher income taxes, property taxes, or innovative revenue streams like Alaska’s oil dividends. Savvy individuals must consider the entire tax ecosystem when choosing where to live, shop, or do business.

Ultimately, understanding which states have 0 sales tax empowers you to make informed financial decisions. Whether you’re budgeting for a big-ticket purchase, planning a shopping trip, or relocating your business, this knowledge can help you keep more of your hard-earned money—legally and wisely.

Which states in the U.S. have no sales tax?

As of now, five U.S. states do not impose a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. These states rely on alternative sources of revenue, such as income taxes, property taxes, business taxes, or tourism-related fees, to fund public services. While shoppers benefit from avoiding a general sales tax in these states, it’s important to note that the absence of a statewide tax doesn’t necessarily mean all purchases are entirely tax-free.

Some local jurisdictions within these states may still levy their own sales or special taxes. For example, Alaska allows local municipalities to impose sales taxes, meaning that while the state itself doesn’t collect sales tax, some cities or boroughs might. Similarly, in Montana, while there is no state sales tax, certain resort areas may have local option taxes on services like lodging or vehicle rentals. Shoppers and businesses should verify local tax rules even in states with no broad sales tax.

Can I save money by shopping in a state with no sales tax?

Yes, consumers can potentially save money by making purchases in states with no sales tax, especially on large-ticket items like electronics, vehicles, or furniture. Since many of these states also lack a state-level sales tax on services, businesses offering out-of-state customers might pass on those savings—though this depends on the seller’s location and shipping policies. Physical shoppers who travel to tax-free states often report significant savings, particularly when buying items that would otherwise be subject to 7%–10% sales tax elsewhere.

However, online shoppers should be aware that many states apply economic nexus rules under the 2018 South Dakota v. Wayfair Supreme Court decision. This means out-of-state retailers may still collect sales tax on purchases shipped to customers, even if bought from a business based in a state with no sales tax. The determining factor is often where the buyer resides, not where the seller is located. Always check whether tax is collected at checkout and review potential use tax obligations in your home state.

Does Alaska really have no sales tax?

Alaska does not impose a statewide sales tax, making it one of the five states known for being sales-tax-free at the state level. Instead, the state depends heavily on oil revenues and other taxes to fund its operations. This lack of a uniform sales tax is appealing to both residents and visitors, especially those making large purchases in places like Anchorage or Juneau. However, the situation isn’t quite as straightforward as it seems due to local tax authority.

Local municipalities in Alaska are permitted to enact their own sales and excise taxes. Over 150 local jurisdictions across the state—such as cities and boroughs—levy sales taxes ranging from 1% to 7% or higher. For instance, the city of Valdez has a local sales tax rate of about 4%. Therefore, while Alaska has no state-level requirement, shoppers may still encounter sales tax depending on the city or town where the transaction occurs. It’s important to verify local tax rates when making significant purchases.

Why do some states choose not to have a sales tax?

States without a sales tax typically compensate with other forms of taxation or revenue sources. For example, Delaware relies on a robust corporate income tax and franchise fees, attracting thousands of U.S. corporations to incorporate there. New Hampshire and Oregon depend more on property taxes and excise taxes, while Montana uses income taxes and special fees on tourism and recreation. These alternative funding mechanisms help support public services like education, infrastructure, and healthcare without burdening consumers at the point of sale.

Additionally, eliminating sales tax can be a strategic economic decision. States like Delaware and New Hampshire foster shopping tourism, drawing out-of-state visitors who want to avoid high sales tax rates at home. Businesses may also benefit from operating in tax-friendly environments, although employment taxes and other fees still apply. Still, the absence of sales tax is not necessarily a net benefit for residents, as other taxes may be higher. Each state’s approach reflects a balance of economic incentives and public finance priorities.

Are there any disadvantages for businesses operating in states with no sales tax?

While operating in a sales-tax-free state might sound advantageous, businesses may face trade-offs. Without a sales tax, states often depend more heavily on corporate income taxes or other business fees to generate revenue. For example, in Nevada—often confused as sales-tax-free—there is no personal income tax, but businesses are subject to modified business taxes and excise taxes. This can offset savings from avoiding sales tax collection responsibilities. Additionally, access to infrastructure, workforce quality, and proximity to markets may be more important than tax structure alone.

Another challenge is the complexity of remote sales tax compliance. Even if a business is in a state without sales tax, it may still be required to collect and remit sales tax in other states where it has nexus—whether through physical presence, employees, or online sales volume. This compliance burden can increase operating costs. Furthermore, some states without sales tax have lower population density or consumer spending, which could limit sales volume. Businesses need to evaluate overall cost of operations rather than tax rate alone.

Do residents of sales-tax-free states pay use tax instead?

Yes, residents in states with no sales tax may still have tax obligations through use taxes, though this primarily applies when they purchase taxable goods outside their home state. A use tax is essentially the counterpart to a sales tax and is levied on items bought without sales tax but used, stored, or consumed within a state that normally taxes such goods. However, in no-sales-tax states, the concept doesn’t typically apply because their tax systems don’t impose such a requirement. Instead, it’s residents of high-sales-tax states who often owe use tax on out-of-state purchases.

For example, if a resident of California buys a laptop from a retailer in Oregon (a no-sales-tax state), California requires that individual to self-report and pay use tax equivalent to the local sales tax rate. But if someone from New Hampshire buys a TV in Delaware, they generally owe no use tax since neither state imposes one. Still, it’s important for all consumers to understand their home state’s tax rules, as non-compliance with use tax reporting can lead to penalties, especially on larger purchases from out-of-state vendors.

How does the absence of sales tax affect online shopping?

The absence of sales tax in certain states no longer guarantees tax-free online shopping for most consumers. Following the 2018 Wayfair decision, states can require online retailers to collect sales tax based on economic activity—even if the retailer has no physical presence in the state. This means that a company based in Oregon might still collect sales tax from a customer in New York. The key factor is the buyer’s location, not where the seller resides. Therefore, simply buying from a business in a no-sales-tax state often doesn’t result in tax savings for out-of-state customers.

However, consumers in the five no-sales-tax states may still benefit when shopping online for digital goods, subscriptions, or services that are exempt from taxation in their state. Additionally, residents of these states generally do not owe use tax on online purchases made from sellers who don’t charge tax, since their home state doesn’t impose this obligation. For businesses, this landscape means that even if based in a tax-free state, they may need robust tax compliance systems to handle multi-state sales obligations, reducing the operational simplicity once enjoyed.