5 States Without Sales Tax

What is the main purpose of sales tax? In general, states introduce a sales tax in order to generate state revenue.

Therefore, when considering or proposing legislation related to the taxation of goods and services, it may be helpful to think about what aspects you would want your state’s system to prioritize – fairness? simplicity? ease of compliance? broad base? low rate?

While all these things can matter greatly when thinking about a state’s overall tax structure, ultimately the most important thing for policymakers probably concerns maximizing revenue.

For this reason, states frequently have provisions in their tax codes that mirror federal rules on how certain transactions are treated from a tax perspective.

However, there are actually five states in the country that do not levy a sales tax.

As of June 2011, five U.S. states that do not have a sales tax are Oregon, New Hampshire, Delaware, Montana, and Alaska.

While these states may be sales tax-free, these five so-called “sales tax havens” still manage to keep their budgets afloat with their own little loopholes.


Oregon has only a few municipalities that collect sales tax on certain goods.

To offset the absence of sales in other areas, Oregon’s Constitution allows the state to impose an income tax on its residents. To note, Oregon imposes a high income tax compared to other states.

Oregon also collects excise taxes for certain kinds of goods. This includes fuel, cigarettes, and beer. The state also collects an inheritance tax for estates that take in over $1 million in assets.

Despite the absence of a traditional sales tax, Oregon levies more taxes on its residents than most other states. 

New Hampshire

New Hampshire does not collect sales tax on most goods. However, the state collects sales taxes on alcohol and accommodations.

The state also collects income tax but only on the basis of interest income and dividend income.

The downside, though, is that the state has one of the highest property tax rates in the country which is one of its offsets for its nearly zero sales tax collection.

Additionally, New Hampshire levies a 5 percent “business profits tax”, which is intended to function as an alternative means of taxation for the business community. 


According to the Tax Foundation, Delaware does not impose sales taxes on the tangible property but does apply a gross receipts tax on services and on some sales of goods, including mobile homes.

Delaware also tracks a company’s total gross receipts for the purpose of taxation. The state’s use of a combined reporting system allows it to track a company’s revenue from all its affiliates within the country.

In lieu of sales tax and low property tax, Delaware levies a high income tax, especially for corporate entities.


Montana does not have a state sales tax but it imposes local sales taxes on some of its municipalities, especially those that are frequented by tourists. 

Some of these places include Big Sky and Whitefish. These local sales taxes will be used to improve infrastructure in tourist-frequented areas of the state.

Montana also has huge property taxes and also has income taxes but are within the country’s average rate.



Zero sales tax is not absolute in Alaska. Areas like the borough of Juneau actually collect sales tax.

According to the Tax Foundation, Alaska does not impose a sales tax in most of its areas and has no state income tax also.

Alaska, on the other hand, has one of the highest property tax rates in the country, thanks to the high cost of living due to its harsh weather conditions.

Alaska also imposes a corporate income tax that is slightly higher than most other states, but this is coupled with high property taxes.

The Bottom Line

While sales tax is not imposed in five states, there are still other forms of taxation that make up for lost revenue.

Most of the sales tax-free states also impose high income taxes and even higher property taxes to offset their lack of sales tax. 

Oregon, New Hampshire, Delaware, Montana, and Alaska are all states without sales tax because they have it covered with other taxes so the average person doesn’t pay more than their fair share.

A sales tax is a consumption-based tax that the consumer pays when they make a purchase. The sales tax is considered to be "passed through" and thus paid for by the end-user.
Excise taxes are paid by companies when they want to make a sale on a product. There are many kinds of excise taxes, including those for alcohol, tobacco, and gasoline.
Some states are allowed to not have a sales tax primarily because sales tax laws are not subject to federal regulation. Also, states that do not have sales tax make enough money from other sources such as real estate and income taxes. The state has higher property or income taxes than most other states, which drives up the prices for businesses and individuals.
You can check your local and state taxation office to get that information or you can look at this list of state and local sales tax rates.
There are no more than five, but some do have local governments who collect taxes within their jurisdictions.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.