5 States With No Sales Tax

Many states rely on sales taxes to generate revenue, but a handful choose not to impose a statewide sales tax. In these states, consumers don’t pay an additional state-level fee when purchasing retail goods or services. This difference can meaningfully impact your spending, given that sales tax rates reach as high as 7.25% in places like California, according to the Tax Foundation. ¹

A financial advisor can help you minimize your taxes over the long term.

What Are Sales Taxes?

When you purchase a product or service, the business adds sales tax to the cost. After purchase, the business then passes these taxes on to the appropriate state and local government.

Currently, 45 states and the District of Columbia impose a general sales tax. However, there are five states that don’t charge statewide sales taxes.

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

Of these five, however, some allow localities to impose sales taxes and excise taxes.

The States With No Sales Tax

Alaska 

Alaska doesn’t charge a statewide sales tax, but that doesn’t mean the state is entirely free from sales tax. Some municipalities impose local sales taxes of up to 7.5%. ²

For instance, Homer charges a local sales tax of 7.85% and Seward charges 7.00%, while Soldotna imposes a combined sales tax of 6%. ³

Delaware

Though Delaware doesn’t impose a state sales tax, it does require certain businesses to pay a gross receipts tax. ⁴ Consumers don’t have to account for this tax, but the sellers of the goods or services do.

The gross receipts tax rates vary by business activity, ranging from 0.0945% to 1.9914%, according to the state’s Division of Revenue website.

Montana

Montana is quite similar to Alaska in that it allows localities to assess sales tax. These cities are usually tourist destinations, and they charge resort and local option taxes.

The resort tax is a local option tax charged on the retail value of products and services sold by several types of businesses. ⁵

• Recreational facilities
• Camping and lodging facilities
• Restaurants and other food establishments
• Public establishments serving alcohol
• Establishments selling luxury items

These taxes are levied at the city and county levels and cannot exceed 3%.

Montana’s resort tax municipalities include areas like Red Lodge, Whitefish, Virginia City and West Yellowstone. The taxes only apply to areas with populations under 5,500 that meet state-imposed resort qualifications.

New Hampshire

In New Hampshire, neither the state nor any of its localities charge a sales tax. ⁶

However, certain goods and services are subject to excise taxes and other taxes.

• Room, meals and car rentals: 8.5% ⁷
• Communication services: 7% ⁸
• Timber tax: 10% ⁹

Since the statewide sales tax is set at 0%, local governments cannot impose sales taxes. Instead, they levy excise taxes on the sale of items like tobacco and electricity.

Oregon

Like New Hampshire, Oregon doesn’t impose a statewide sales tax. ¹⁰

However, it charges excise taxes, which are levied on products like these.

• Tobacco products ¹¹
• Privilege tax (alcohol, cannabis) ¹²
• Gasoline ¹³

It’s worth noting that Oregon has a higher personal income tax compared to other states. ¹⁴ However, there is no tax on intangible properties, such as bonds or stocks.

The state does, however, allow cities to impose their own sales taxes. For instance, Ashland charges a 1.333% monthly and 16% annual local sales tax on the sale of prepared food. ¹⁵

5 Other Low-Tax States

In addition to sales taxes, you may also want to consider other taxes that your state may assess.

• Income tax
• Property tax
• Estate tax
• Inheritance tax

While some states have no income tax, they may offset the loss of revenue with higher property or sales taxes. This is why it’s important to weigh these factors in relation to your lifestyle, income and long-term financial goals.

For example:

• If you’re nearing retirement, a state with no income tax and low property taxes could make a significant difference in your ability to preserve your savings.
• If you rely more on investments, understanding how a state taxes dividends and interest income may be more important.

These five low-tax and no-tax states are popular among those looking to minimize their tax burden.

Florida

Florida is one of the most tax-friendly states in the U.S. with no state income tax, making it a major draw for retirees especially.

This lack of income tax applies to all forms of earnings, including wages, salaries and investment income. It makes it an attractive option for those with substantial savings or investments.

Additionally, Florida does not have an estate tax nor an inheritance tax. This allows residents to pass on wealth to heirs without state-level tax complications. Property taxes in Florida are relatively moderate, though they can vary by county.

Tennessee

Tennessee has no state income tax on wages or salaries. ¹⁶

As of 2021, it also eliminated taxes on interest and dividends, making it a true no-income-tax state. This makes Tennessee ideal for high earners with investment income.

Property taxes are low compared to the national average, saving residents money each year. The state has no estate or inheritance taxes.

While Tennessee imposes a sales tax higher than the national average, the lack of an income tax often offsets this for many residents. ¹⁷

Wyoming

Wyoming is another no-income-tax state, offering residents a significant tax advantage.

In addition to not having a state income tax, Wyoming also boasts low property taxes with no estate tax or inheritance taxes. This combination of low taxes makes Wyoming particularly attractive for retirees and high-income earners looking to maximize their financial resources.

Wyoming’s reliance on mineral extraction for revenue allows it to keep taxes on residents low, ¹⁸ making it one of the most tax-friendly states in the U.S.

South Dakota

South Dakota stands out for having no state income tax. This applies to both earned income and investment income. ¹⁹

The state imposes low property taxes, making it an appealing destination for individuals looking to lower their overall tax burden. South Dakota does not levy an estate tax or inheritance tax, further adding to its appeal as a tax-friendly state.

Like Wyoming, South Dakota benefits from a strong economy built on industries that help keep taxes low.

Nevada

Nevada offers no state income tax. ²⁰ This applies to all types of personal income, including wages, salaries and investment income.

Because of this, Nevada remains an attractive destination for both workers and retirees. Nevada property taxes are moderate, and while the state relies on sales taxes for revenue, it’s still considered a tax-friendly state due to the absence of an income tax.

There are also no Nevada estate tax or inheritance taxes, making it an appealing choice for those looking to pass on wealth to their heirs.

How Sales Taxes Affect Your Cost of Living

Sales taxes play a significant role in your overall cost of living because they directly affect the price you pay for everyday goods and services.

While a single purchase may only see a modest increase, those additional costs can add up quickly. This is especially the case in states where combined state and local tax rates exceed 7% or 8%.

For example, buying a $1,500 laptop in a state with a 7% sales tax adds an extra $105 to the final price. You wouldn’t pay this amount in a state with no statewide sales tax. Even smaller, routine purchases like clothing, toiletries and dining out can increase your monthly spending and affect your budget without you fully realizing it.

Over the course of a year, these incremental differences can make a meaningful impact on your budget. Someone who spends $25,000 annually on taxable goods and services in a high-tax state could pay more than $1,500 per year in sales taxes alone.

In contrast, residents of states with no statewide sales tax may be able to address other financial needs. They can redirect that money toward savings, use it for debt repayment or satisfy other financial goals.

These cost differences can be especially important for retirees or individuals living on fixed incomes. Because their budgets are more predictable, and often more limited, avoiding sales taxes can help preserve purchasing power while stretching monthly resources further.

How to Factor Sales Tax Into a Decision to Relocate

A state’s sales tax rate can affect your annual spending, but it rarely tells the whole story. States that collect little or no sales tax often generate revenue through other taxes. This means a move that looks attractive at first glance may not actually lower your overall tax burden.

Income Taxes

Income taxes are often the biggest piece of the equation.

Several states with no sales tax or relatively low sales taxes also have no state income tax, which can create meaningful savings for retirees and high earners. On the other hand, some states offset the absence of a sales tax with comparatively higher income tax rates, making the net benefit less clear.

Property Taxes

Property taxes deserve equal attention. A lower sales tax bill may be offset by higher annual property taxes, especially for homeowners.

Depending on the value of your home, differences in property tax rates can have a larger impact on your finances than sales tax savings alone.

State and Local Taxes

The best way to evaluate a potential move is to estimate your total state and local tax burden rather than focusing on a single tax.

Compare what you currently pay in income taxes, property taxes and sales taxes with what you would pay in the new state. Seening the three together provides a more realistic measure of the financial impact.

Retirement Taxes

Retirees should also consider how a state taxes retirement benefits, including these.

• Social Security benefits
• Pension income
• Retirement account withdrawals

Two states with similar sales tax rates can produce very different outcomes when you calculate income taxes for retirement.

Cost-of-Living Expenses and Comfortability

Taxes are only one part of the relocation decision. Housing costs, healthcare access, insurance premiums and proximity to family can ultimately have a greater effect on your quality of life and long-term finances.

Evaluating the full picture can help determine whether a move delivers meaningful savings or simply shifts costs from one category to another.

Bottom Line

If you live in any of these first five states, you can count out any state-level sales taxes on your purchases. You may pay state taxes like local sales taxes, excise taxes and resort/local option taxes. Therefore, it is wise to check your city’s official government website so you won’t be blindsided by any additional fees.

Tax Planning Tips for Beginners

• A financial advisor can help you navigate areas of finance such as tax planning, investing, retirement planning and more. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• When planning out your budget, you’ll also want to account for income taxes. Even if you’re in a state without income taxes, you’ll still have to pay federal income taxes. Our federal income tax calculator can help you.

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