Sales tax laws in the U.S. are governed at the state level, allowing each state to control its base sales tax.
Even if a state does not impose a state sales tax, local municipalities and counties might levy excise or surtaxes. For instance, New York State has a 4% sales tax, but New York City adds additional taxes, bringing the total rate to 8.875%.
1. Alaska
While Alaska has no state sales tax, local governments can levy taxes on certain goods and services. For example, the sales tax in Juneau is 5%, whereas Anchorage and Fairbanks do not have sales taxes. The average rate statewide for municipalities is 1.76%.
2. Delaware
instead of a income tax, Delaware imposes a gross receipts tax on certain corporations. Delaware also levies excise taxes at a flat rate per gallon on goods such as motor fuel and alcohol. The state has relatively high corporate income taxes and additional taxes on specific distributors of goods and services, allowing for a 0% property tax and sales tax.
3. Montana
Montana has a 0% sales tax overall, but tourist-heavy localities impose low sales taxes of up to 3%, known as a resort and local option tax, to support infrastructure frequented by tourists. Qualifying cities must have a permanent population of under 5,500, including places like Whitefish, Red Lodge, Big Sky, and West Yellowstone.
4. New Hampshire
New Hampshire does not impose a state sales tax, but it has an 8.5% meals and rentals tax for prepared food in restaurants, short-term room rentals, and car rentals. A timber tax is imposed at 10% of the value of the wood at the time of cutting, excluding cutting for personal use. Local governments cannot impose sales taxes due to the statewide 0% sales tax, so excise taxes are levied on sales of tobacco and energy.
5. Oregon
With a 0% statewide sales tax, Oregon's municipalities impose taxes on certain goods such as tobacco and prepackaged alcoholic beverages. Some local governments implement sales taxes, like Ashland’s 5% tax on prepared foods. Oregon has a high personal income tax relative to other states but does not tax intangible properties like stock accounts and bonds.
Which U.S. States Have No Sales Tax?
The five states with no sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon.
What Is the Most Tax-Friendly State?
Several states offer favorable tax treatments, from sales tax to income tax. For instance, Delaware has no sales tax and the nation's seventh-lowest median property tax rate. Alaska also has no state sales tax, though Juneau has a 5% local sales tax rate. Additionally, there is no income tax statewide. Wyoming offers low income tax, property tax, and no income tax, making it one of the maximum tax-friendly states within the U.S.
Which U.S. States Have the Highest Sales Tax?
California has the highest state sales tax in the country at 7.25%. Following California are Indiana, Mississippi, Rhode Island, and Tennessee, all with a 7% sales tax rate.
Which States Have Minimal Sales Tax Rates?
The following eleven states have a sales tax between 2% and 5%: Alabama (4%), Colorado (2.9%), Georgia (4%), Hawaii (4%), Louisiana (4.45%), Missouri (4.23%), New York (4%), North Carolina (4.75%), Oklahoma (4.5%), South Dakota (4.5%), and Wyoming (4%).
Which States Have the Highest Combined State and Local Sales Tax?
Statewide sales taxes are found in 45 U.S. states, while local sales taxes are present in 38 states.
The Bottom Line
State tax laws are unregulated at the federal level, allowing each state to set its own base sales tax rate. States like New York and California have high sales tax rates, while Delaware, Montana, and New Hampshire have no sales tax. Depending on where you live and travel, paying (or not paying) sales tax can significantly impact your budget. Sales taxes fund services like schools and infrastructure, so living in a state without high sales taxes means that revenue must come from other taxes.