These 5 States Have No Sales Tax
What you see is what you pay.
- There are five states that don’t charge state sales tax.
- Of those, only three don’t allow local sales taxes.
- States with no sales tax tend to have higher taxes in other areas, such as property taxes or income taxes.
In most of the US, shopping requires you to do a bit of math as you go. That’s because most areas have state and local sales taxes.
What’s worse, most stores don’t include those taxes in the prices displayed on the shelves. This double whammy means your total at checkout could easily be 5% to nearly 10% higher than advertised. That extra cost can throw a wrench into your personal finances.
For some US residents, however, the sales tax paid in other states is as foreign as the VAT (value added tax) paid by shoppers in the UK How? They live in one of the five states with no state sales tax.
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If you’re willing to live at the far edge of the frontier, you can get away from a lot of taxes. Alaska charges neither a state sales tax nor state income tax. The property tax rate is somewhat middle of the road, but there are exemptions for many instances.
However, just because the state of Alaska doesn’t charge sales tax doesn’t mean you can avoid it altogether. Some of the smaller local governments have their own sales tax regulations. While the state’s largest cities, Anchorage and Fairbanks, don’t have sales tax, the Borough of Juneau — where the capital city is located — has a 5% sales tax rate.
The little state of Delaware is known as a great place to start a business thanks to its corporation-friendly laws (and lack thereof). It’s also nice for residents who don’t want to deal with sales tax; There’s no state sales tax, nor are local sales taxes allowed. The property taxes are also some of the lowest in the country.
That being said, Delaware isn’t necessarily a tax-free paradise. The state charges gross receipts taxes for certain businesses, as well as excise taxes on specific goods like gas and alcohol. Residents also pay a relatively high income tax rate.
What few residents there are in the state of Montana, they aren’t stuck paying sales tax. There’s no state sales tax, nor are there local sales taxes charged by most counties and cities.
If you’re only coming into the state for vacation, however, you may be hitting with local resort taxes on restaurants and hotels. And if you’re a resident, watch out for pretty steep income taxes, as well as less-than-competitive property taxes.
4. New Hampshire
With a motto like, “live free or die,” you can expect New Hampshire to do things its own way. When it comes to taxes, that includes having no state or local sales taxes, as well as forgoing state income taxes.
You can’t live free of all taxes, though. There are certain luxury taxes, like an extra tax on dining out. Homeowners also pay some of the highest property taxes in the country. And be prepared to pay extra taxes on certain types of investment income.
Perched atop the state with one of the highest sales tax rates in the country (California) is Oregon, which has none — no state sales tax, and no local sales taxes, either.
This lack of sales taxes does have a few limitations; There are tobacco and alcohol taxes, and some areas have taxes on other luxuries like prepared foods. Oregon also has one of the highest tax income rates, and a middling property tax rate.
Just a portion of the total tax burden
As much of a pain as paying sales tax can be, it serves an important purpose. State and local taxes go to funding important services like schools and libraries.
What’s more, just because you don’t pay sales tax doesn’t mean you don’t pay taxes at all. As you can see above, states without sales taxes tend to make up the difference in other ways, such as with higher income taxes or property taxes.
So, when gauging what your expenses are going to be in a given area, make sure you look at the entire tax burden instead of focusing on a single aspect like sales tax.
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