States with No Sales Tax: A Look at Alaska, Delaware, Montana, New Hampshire, and Oregon
As of 2024, five notable states in the U.S. do not impose a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. While these states may lack a state sales tax, it’s essential to note that they may have additional local taxes on specific goods and services.
Sales Tax Laws in the United States
In the U.S., sales tax laws are not federally regulated, granting each state autonomy over its sales tax policies. Sales tax is typically applied to retail transactions and selected services across various states.
Local Taxes Impacting Sales Tax
Even if a state does not have a sales tax, local municipalities and counties can impose excise or surtaxes. For instance, while New York state has a 4% sales tax, New York City adds extra taxes, elevating the rate to 8.875%.
Key Takeaways
- State sales tax can affect the cost of purchases by adding to the sticker price.
- Revenue generated from sales tax supports state operations, with Alaska, Delaware, Montana, New Hampshire, and Oregon currently not imposing a state sales tax.
- California leads with the highest state sales tax rate in the U.S.
1. Alaska
Alaska does not have a state sales tax, but certain local governments can levy taxes on specific goods and services. Juneau imposes a 5% sales tax, while Anchorage and Fairbanks do not have sales taxes, with the average municipal rate statewide standing at 1.76%.
2. Delaware
Instead of a sales tax, Delaware charges a gross receipts tax on certain businesses. Excise taxes are prominent, levied on goods like motor fuel and alcohol.
Delaware boasts relatively high corporate income taxes and additional levies on specific goods and services, contributing to a state structure featuring a 0% property and sales tax.
California holds the highest sales tax rate in the U.S., standing at 7.25%. Puerto Rico, a non-state territory, enforces an 11.5% sales tax.
3. Montana
Montana overall has a 0% sales tax rate, but tourist-oriented localities levy sales taxes up to 3% known as resort and local option taxes. Cities like Whitefish, Red Lodge, Big Sky, and West Yellowstone fall under this category.
4. New Hampshire
While New Hampshire lacks a state sales tax, a meals and rentals tax of 8.5% applies to prepared meals in restaurants, short-term room rentals, and car rentals. Additionally, a 10% timber tax is imposed on wood cutting transactions, excluding personal use.
Local governments can’t impose sales taxes due to the statewide 0% sales tax, hence excise taxes are enforced on products like tobacco and electricity.
5. Oregon
Oregon has no statewide sales tax. Local municipalities enforce taxes on specific goods like tobacco and prepackaged alcoholic beverages. Some cities implement sales taxes, such as Ashland’s 5% tax on prepared foods.
Oregon maintains a relatively higher personal income tax than other states but excludes intangible properties like stock accounts and bonds from taxation.
Additional Insights
Which U.S. States Have No Sales Tax?
Alaska, Delaware, Montana, New Hampshire, and Oregon are among the states without a sales tax.
What Is the Most Tax-Friendly State?
Delaware, Alaska, and Wyoming are among the most tax-friendly states in the U.S., offering low or no sales tax, income tax, and property tax rates.
Which U.S. States Have the Highest Sales Tax?
California ranks first in imposing the highest sales tax rate at 7.25%, followed by Indiana, Mississippi, Rhode Island, and Tennessee with 7% rates.
Which States Have Minimal Sales Tax Rates?
States like Alabama, Colorado, and Georgia have sales tax rates ranging from 2% to 5%, offering minimal tax rates on retail transactions.
Which States Have the Highest Combined State and Local Sales Tax?
Several states like Alabama, Arkansas, and Louisiana carry the highest combined state and local sales tax, impacting rates for sales transactions.
The Bottom Line
State sales tax laws vary widely, with states having autonomy over their tax structures. Sales tax plays a vital role in revenue generation for state services, with high-tax states compensating in other tax areas for revenue collection.
Living in states without a substantial sales tax influences funding mechanisms for essential services, as revenue generation shifts towards alternative taxation methods.