There are a handful of legal ways to not pay sales tax: shop in one of the five states without a statewide sales tax, buy goods your state has permanently exempted (groceries, prescriptions, sometimes clothing), time a purchase to a sales tax holiday, or present a valid exemption certificate if you’re buying for a business, nonprofit, or government agency. Each of these works. What trips people up is the companion rule most states rely on to close the loophole: use tax, which your home state expects you to pay on anything you brought in without paying sales tax somewhere else.
Legal Avoidance Versus Evasion
Everything in this article sits on the legal side of a firm line. Using an exemption a legislature wrote into the law is avoidance. Hiding purchases, filing a false form, or using a resale certificate to buy personal goods is evasion. Federal law treats willful tax evasion as a felony punishable by up to five years in prison, a fine of up to $100,000, or both.1Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax States pile their own penalties on top. Some of the tips that circulate online, particularly around resale certificates, land on the criminal side of that line.
Shop in a State With No Statewide Sales Tax
Five states charge no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Buy a laptop in Portland and the price on the tag is the price at the register.
Alaska has a wrinkle. The state itself charges nothing, but more than a hundred cities and boroughs set their own rates ranging from 1% to 7%.2Department of Commerce, Community, and Economic Development. Alaska Tax Facts Anchorage has no local sales tax; a small borough down the road might. The other four states don’t have this local layer in any meaningful form.
Before you plan a run across the border for electronics, read the use tax section below. If you carry the item home to a state that charges sales tax, your state expects the tax anyway.
Buy Goods Your State Has Already Exempted
Even inside states with sales tax, whole categories of goods come off the shelf tax-free. Legislatures carve these out because taxing necessities hits low-income households hardest.
Groceries
Most states exempt unprepared food. Bread, eggs, raw meat: no tax. The exemption almost always excludes prepared food like deli sandwiches and hot rotisserie chicken, and it often excludes candy, soft drinks, and snack foods. Registers are programmed for the split, so a single receipt can show some items taxed and others not.
Prescription Drugs and Medical Devices
Nearly every state exempts prescription drugs. The few that tax them at all tend to apply a reduced rate. Medical devices like insulin pumps, prosthetics, and oxygen equipment are also widely exempt. Some states extend the exemption to over-the-counter medications; others draw the line at anything without a prescription. A growing number of states have removed the tax from feminine hygiene products and diapers.
Clothing
Several states exempt clothing, usually with a per-item price cap. A common threshold is $110: a $90 pair of jeans is tax-free, a $250 jacket is taxed on the full amount. The cap varies, and some states tax all clothing regardless of price. Your state’s revenue department publishes the specifics.
Digital Goods
Streaming, ebooks, and downloaded software are treated inconsistently. Roughly half of states tax digital downloads and cloud-based software; the other half treat them as nontaxable services or simply haven’t updated their codes. A paperback that’s exempt can have a taxed ebook version, which is worth checking before assuming digital is cheaper.
Time a Purchase to a Sales Tax Holiday
More than a dozen states suspend sales tax on specific goods during short windows each year. The most familiar is a back-to-school holiday in late July or August covering clothing, school supplies, and computers. The windows are short, usually a weekend or a week, and every eligible category comes with a per-item price cap. Common caps: $100 per clothing item, $50 per school supply, $1,500 per computer.
Some states run other holidays as well. Energy-efficient appliance holidays cover ENERGY STAR products. Emergency preparedness holidays cover generators, batteries, and weather radios. A few states have tried holidays for hunting and camping gear.
The caps are strict. A $1,600 laptop during a holiday with a $1,500 computer cap is taxed at the full rate on the full price, not just on the $100 above the cap. Your state’s department of revenue posts the dates, eligible items, and caps a few months out.
Online Shopping Rarely Skips the Tax Anymore
If you remember buying online to avoid sales tax, that era closed in 2018. The Supreme Court’s decision in South Dakota v. Wayfair, Inc. ended the rule that a retailer needed physical presence in a state before being required to collect that state’s sales tax.3Supreme Court of the United States. South Dakota v. Wayfair, Inc. Any seller delivering more than $100,000 in goods or 200 or more transactions into a state in a year can be required to collect there.
More than 40 states adopted economic nexus laws on that model, and nearly all also passed marketplace facilitator laws putting the collection duty on the platform itself. Amazon, eBay, Etsy, and Walmart collect and remit for every third-party seller on their sites. So even a handmade candle from a sole proprietor in Montana comes with your state’s sales tax at checkout, because the platform crossed the threshold long ago.
The practical result: shopping online from a state with sales tax, you’re paying it on almost everything. The rare exceptions are small independent sellers who haven’t hit the economic nexus threshold and who sell only through their own website.
Use Tax: The Rule That Closes the Loophole
This is the part that undoes most of the strategies above. Use tax applies whenever you buy something without paying sales tax and then store, use, or consume it in a state that has a sales tax. Every state with a sales tax has a matching use tax at the same rate. The purpose is to keep you from dodging state tax by crossing a line or buying from a seller that didn’t collect.
Drive to a no-tax state, buy a $2,000 television, bring it home, and your home state expects you to report the purchase and pay use tax at its normal rate. The same rule reaches purchases made while traveling, catalog orders, and online orders from sellers who didn’t collect.
Most states put a use tax line right on the individual income tax return. You tally your untaxed purchases and pay when you file. Compliance is low because the system relies on self-reporting, and states have historically had limited tools to chase small consumer purchases. That’s changing as states match purchase data. Getting caught means back taxes, interest, and penalties. For large registered purchases, enforcement is essentially automatic.
So buying in a no-tax state saves you the tax only if you use the item there. Take it home and the use tax rebuilds the bill.
Vehicles, Boats, and Anything You Have to Register
Big-ticket items that require registration are the hardest to buy tax-free, because registration forces the calculation. Buy a car in another state, bring it home, and your DMV or tax office figures the sales or use tax before issuing plates. There’s no honor-system version of this.
Many states credit sales tax already paid to the purchase state. Paid 4% there, home state charges 6%, you owe the 2% gap. Not every state offers this credit, some cap it, and some exclude certain vehicle types. A few require the full tax regardless of what you paid elsewhere. It depends on the reciprocal agreement between the two states, so ask your home state’s revenue department before assuming a credit applies.
The same logic reaches boats, RVs, and in some states aircraft. If it gets registered or titled, the state collects at that point.
Exemption Certificates: When They Actually Apply
Individuals shopping for personal use have the options above and not much else. Businesses, nonprofits, and government agencies have formal exemption certificates that strip the tax entirely from qualifying purchases.
Resale Certificates
A business buying inventory to resell can present a resale certificate to its supplier and skip the sales tax. The idea is that sales tax should be collected once, from the final consumer, not at each step of the supply chain. The certificate requires your sales tax permit number, a description of what you’re buying, and a statement that the goods are for resale. Forms vary by state, and some accept multistate versions.4Streamlined Sales Tax Governing Board, Inc. Exemptions
The rule that matters: a resale certificate covers only goods you actually intend to resell. Using one to buy personal items tax-free is fraud. Penalties vary but commonly include the unpaid tax, a substantial percentage penalty on top (often 50% or more of the tax owed), and in serious cases criminal charges. Sellers can also be liable if they accept a certificate they should have known was invalid, so don’t expect a retailer to help you around it.
Nonprofit Exemptions
Organizations with IRS 501(c)(3) status can often buy goods for their charitable mission tax-free.5Internal Revenue Service. EO Operational Requirements – Obtaining Copies of Exemption Determination Letter From IRS The federal determination letter alone isn’t enough in most states; you also need to register with the state revenue department and get a state-level exemption number. Certificates need periodic renewal, and the exemption covers only purchases for the organization’s exempt purpose. Personal purchases by staff or board members don’t qualify.
Government Purchases
Federal, state, and local government entities are exempt on official purchases, typically through government purchasing cards or formal purchase orders. Retailers registered with programs like the federal GSA SmartPay system can verify the exemption at checkout.6GSA SmartPay. Amazon.com Tax Exemption Procedures Working for a government agency doesn’t extend the exemption to your personal shopping.
Getting the Exemption Applied Correctly
In person, hand the certificate to the cashier or manager before payment goes through. The merchant enters your permit number or scans the certificate and the system removes the tax. Coming back after the transaction is done and asking for the tax back rarely works at the store level.
Online, the major retailers run dedicated exemption portals. Amazon’s Tax Exemption Program lets qualifying buyers upload the certificate once, and the system then strips tax from eligible orders. Your shipping address has to match the jurisdiction on the certificate. Most other large retailers offer something similar with their own setup.
If you paid tax on a purchase that should have been exempt, you can file a refund claim with your state tax authority. It takes a written claim, receipts, and proof of exempt status, and processing runs several months. Getting the exemption applied at checkout is always easier than getting the money back after.