Which states have no sales tax?
While the vast majority of states collect a sales tax ranging from 3% to 7% or more, there are five states where most purchases can be made sales-tax-free. These states are New Hampshire, Alaska, Oregon, Delaware, and Montana.
While each state must generally make up for the lost revenue through some other avenue, people living in areas bordering these five states often take advantage of the 0% sales tax to save money on retail purchases.
In addition to having no general state sales tax, New Hampshire also has no personal income tax and collects most state revenues from property taxes.
While there is no statewide sales tax, there are sales taxes of 9% of prepared meals, hotel rooms, and vehicle rentals. The state also collects excise taxes on gasoline, cigarettes, alcohol, and electricity.
Along with New Hampshire, Alaska is one of the only states that has no sales tax as well as no personal income tax. Most of the state's revenues come from petroleum resources, which have also allowed Alaska to pay its citizens a five-figure dividend every year since the 1980s.
Unlike other states on this list, however, Alaska allows local governments (like boroughs and municipalities) to collect local sales taxes of up to 7%. The two largest cities in Alaska, Fairbanks and Anchorage, do not charge a local sales tax while the capital Juneau collects 5%.
While Oregon has no sales tax, this is partially because it has one of the highest state income taxes in the country and is generally considered a high-tax state. State legislature has considered implementing a sales tax multiple times, but the measure has never passed.
While no localities in Oregon collect a general sales tax, many local governments impose taxes on specific purchases including hotel rentals and prepared foods. There are also state taxes on lodging, alcohol, and telecommunications that are usually passed on the the customer.
Delaware, known for having a business-friendly climate, has no state sales tax largely as a method of attracting shoppers from neighboring states like Pennsylvania, New Jersey, and Maryland, all of which have sales taxes. Over 40% of the state's revenues instead come from corporate taxes from the many out of state companies that choose to register in Delaware.
Delaware does impose a gross receipts tax of up to 1.92% on the income of many businesses within the state, as well as a 3.75% registration fee on vehicle purchases which must be paid by the consumer.
Montana has no state sales tax, and makes up for the lost revenue via state income taxes and the taxation of natural resources.
Some tourist-heavy cities in Montana do collect local sales taxes of 3%-7% on certain types of transactions, often including lodging and vehicle rentals.