Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Shoppers in those states pay no state percentage on everyday retail purchases like clothing, electronics, or groceries. But “no sales tax” is not the same as “no taxes at all,” and a few of the states with no sales tax let local governments or specific industries charge their own.
The Five States at a Glance
Each state made a deliberate choice to fund government through other revenue streams. What that looks like on the ground differs from one to the next.
- Alaska. No state sales tax, but cities and boroughs can and do impose their own. Rates vary widely by location.
- Delaware. No sales tax at any level. The state relies on income taxes and a gross receipts tax on businesses.
- Montana. No general sales tax. Resort communities charge a separate tax on lodging, restaurants, and bars, and there is a statewide lodging tax.
- New Hampshire. No sales tax and no broad-based income tax on wages. Revenue leans on property taxes, business taxes, and a targeted tax on meals and hotel rooms.
- Oregon. No sales tax at any level. The state leans on one of the highest income tax rates in the country.
Alaska Is the Big Asterisk
Alaska is the state most likely to catch a visitor off guard. While the state itself charges nothing, it grants broad legal authority to cities and boroughs to impose their own sales taxes.1Department of Commerce, Community, and Economic Development. Alaska Sales Tax Information There is no statutory cap on those rates.
Local rates typically range from about 1% to nearly 8%. Homer currently charges one of the highest in the state at 7.85%. Anchorage, the largest city, imposes no local sales tax at all, so the experience depends entirely on where you happen to be shopping. Some municipalities also levy a local use tax on goods stored or consumed within their borders, even if purchased elsewhere.1Department of Commerce, Community, and Economic Development. Alaska Sales Tax Information
Always check the local rules before assuming your purchase in Alaska will be tax-free.
Targeted Taxes You’ll Still Pay
Even in the states with no general sales tax, targeted taxes on specific goods and services are common.
Meals and Lodging
New Hampshire charges an 8.5% tax on restaurant meals, hotel rooms, and motor vehicle rentals.2New Hampshire Department of Revenue Administration. Meals and Rooms (Rentals) Tax Visit for a week and eat out every night, and you’ll pay a rate comparable to what many sales-tax states charge on everything.
Montana imposes a combined 8% lodging facility tax statewide, split between a 4% use tax and a 4% sales tax on accommodations.3Montana Department of Revenue. Lodging Facility Sales and Use Tax Designated resort communities including Whitefish, Big Sky, West Yellowstone, and Red Lodge charge an additional resort tax of up to 3% on sales at hotels, restaurants, bars, and recreational facilities.4Montana Department of Revenue. Local Resort Tax A ski trip to Big Sky can carry an effective rate of 11% or more on hotel and dining bills. The legislature also authorized an additional 1% resort tax for infrastructure funding, which some communities have adopted.5Montana State Legislature. Montana Code 7-6-1503
Fuel, Alcohol, and Tobacco
Every state taxes gasoline, and these five are no exception. Oregon charges $0.40 per gallon on motor fuel.6Oregon Department of Transportation. Current Fuel Tax Rates Delaware taxes alcoholic beverages on a per-gallon or per-barrel basis, with rates varying by category.7Delaware Department of Finance. Alcoholic Beverage Tax Montana, New Hampshire, and Oregon all impose excise taxes on alcohol and tobacco as well. Those charges are often built into the shelf price rather than added at the register, so you may not notice them, but they are there.
The Trade-Off If You Live There
Skipping a broad consumption tax requires leaning harder on other revenue. That trade-off varies significantly across the five states.
Oregon and Delaware both use graduated income tax systems. Oregon’s top marginal rate reaches 9.9%, one of the highest in the nation. Delaware’s top rate is 6.6%. For residents of those states, the savings at the register get partially eaten by a bigger tax bill in April.
New Hampshire takes a different path. With no sales tax and no broad-based income tax on wages, the state relies heavily on property taxes. Its effective property tax rate runs around 1.77%, ranking fourth nationally. Homeowners there often pay significantly more in property taxes than they would in neighboring states.
Alaska is unusual because it can tap oil and gas revenue to fund state services. Between natural resource revenue and federal funds, Alaska avoids both a state sales tax and a state income tax, though local sales taxes fill some of the gap.
Montana funds its budget through individual income taxes and a 6.75% corporate income tax rate, with the resort-area and lodging taxes picking up some of the difference from tourists.
Delaware and Oregon also impose business-level taxes on revenue rather than profit. Delaware’s gross receipts tax runs from 0.0945% to 1.9914%, with petroleum products taxed as high as 2.4218%.8Division of Revenue – State of Delaware. Gross Receipts Tax FAQs Oregon’s Corporate Activity Tax applies to businesses with more than $1 million in Oregon commercial activity, at $250 plus 0.57% of taxable activity above the threshold.9State of Oregon. Corporate Activity Tax (CAT) Businesses often fold those costs into their prices, so consumers indirectly pay for them even though nothing appears on the receipt.
Use Tax: What You Owe Your Home State
Shopping in a no-sales-tax state doesn’t erase your tax obligation back home. If you live in a sales-tax state and buy something in Oregon or Delaware, your home state expects you to pay a use tax on that purchase. The use tax rate is typically identical to your home state’s sales tax rate, and it exists specifically to prevent people from dodging sales tax by shopping across state lines.
Enforcement is tightest on big-ticket items. Most states require proof of sales tax payment before you can register a vehicle, boat, or trailer. Try to register a car you bought in a no-sales-tax state without paying the equivalent use tax, and your state’s motor vehicle agency will catch it before plates are issued.
For smaller purchases, enforcement is lighter but the legal obligation is the same. Many states include a use tax line on the annual income tax return where residents can report untaxed purchases. Some offer a lookup table to estimate use tax based on income if you don’t have exact receipts. Ignoring this can result in the original tax owed plus penalties and interest if you’re audited. Keep receipts from any significant out-of-state purchase and report it when you file.
Online Shopping After Wayfair
The no-sales-tax advantage used to extend powerfully to online shopping. Before 2018, states could only require a retailer to collect sales tax if the retailer had a physical presence in the state. That changed with South Dakota v. Wayfair, which overruled the physical-presence requirement and allowed states to require tax collection from remote sellers who meet an economic threshold.10Supreme Court of the United States. South Dakota v. Wayfair, Inc. The threshold in that case was $100,000 in sales or 200 or more transactions delivered into the state annually.
Most sales-tax states have since adopted similar economic nexus rules. For consumers, that means an online purchase shipped to a sales-tax state will almost always have tax collected at checkout, regardless of where the seller is located. The practical benefit of a no-sales-tax state now matters most for in-person shopping and for purchases made by residents who use the goods locally. Alaska has adapted through the Alaska Remote Seller Sales Tax Commission, which allows participating municipalities to collectively enforce sales tax collection from out-of-state online sellers shipping into their jurisdictions.11Alaska Remote Seller Sales Tax Commission. About