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Table of Contents

Which States Have the Lowest Sales Tax?

The sales tax laws within the United States are not subject to federal regulation and each state has control over its base sales tax. Sales taxes are imposed on retail transactions and certain services.

Whether or not a state imposes a state sales tax, local municipalities and counties may impose excise or surtaxes. For example, the sales tax in New York state is 4%, but New York City has additional taxes, increasing the rate to 8.875%. 

As of 2022, five states impose a 0.000% sales tax including Alaska, Delaware, Montana, New Hampshire, and Oregon. Each of these states, however, may have individual municipalities that impose excise taxes, income taxes, and taxes imposed on tourist locations.

Key Takeaways

  • State sales tax can factor into making purchases, both large and small, by increasing the cost you pay above the sticker price.
  • Sales tax generates revenue for state-wide operations, but five states currently do not impose a state sales tax including Alaska, Delaware, Montana, New Hampshire, and Oregon.
  • California has the highest sales tax in the nation.

1. Alaska

While there is no imposed state sales tax in Alaska, local governments can levy taxes on certain goods and services. The sales tax is 5% in Juneau, while Anchorage and Fairbanks do not have sales taxes, and the average rate statewide for municipalities is 1.76%.

2. Delaware

Instead of imposing a sales tax, Delaware assesses a gross receipts tax on certain businesses. Delaware makes extensive use of excise taxes levied as a flat rate per gallon on goods such as motor fuel and alcohol.

The state has relatively high corporate income taxes and imposes additional taxation on specific distributors of goods and services, allowing the state to have a 0% property tax and sales tax.

7.25%

The sales tax in California is the highest tax imposed by any state in America. Puerto Rico, which is a non-state territory, levies an 11.5% sales tax.

3. Montana

Overall, the state of Montana levies a 0% sales tax, however, localities of Montana that attract many tourists charge low sales taxes of up to 3%, referred to as a resort and local option tax to support infrastructure frequented by tourists. To qualify for this tax, a city must have a permanent population of under 5,500 and these locations include Whitefish, Red Lodge, Big Sky, and West Yellowstone.

4. New Hampshire

New Hampshire does not impose a state sales tax, however, a meals and rentals tax of 9% exists for prepared meals in restaurants, short-term room rentals, and car rentals. A timber tax is imposed at the time of cutting at 10% of the value of the wood, excluding cutting for personal use.

Local governments cannot declare sales taxes in light of the statewide 0% sales tax so excise taxes are imposed on sales of tobacco and electricity.

5. Oregon

With a zero statewide sales tax, municipalities in Oregon impose taxes on certain goods such as tobacco and prepackaged alcoholic beverages. Some local governments implement sales taxes such as Ashland’s 5% tax on prepared foods

Oregon has a high personal income tax relative to other states, but it does not tax intangible properties like stock accounts and bonds.

Which U.S. States Have No Sales Tax?

Alaska, Delaware, Montana, New Hampshire, and Oregon are the five states that have no sales tax.

What Is the Most Tax-Friendly State?

Various states have favorable tax treatments, from sales tax to income tax. For example, Delaware has no sales tax and has the country's seventh-lowest median property tax rate. Like Delaware, Alaska has no state sales tax, although Juneau has a 5% local sales tax rate. In addition, there's no income tax across the state. Meanwhile, Wyoming offers low sales tax, property tax, and no income tax—making it one of the most tax-friendly states in America.

Which U.S. States Have the Highest Sales Tax?

California has the highest sales tax in the nation, at 7.25%. Following California are Indiana, Mississippi, Rhode Island, and Tennessee, all with 7% sales tax rates.

Which States Have Minimal Sales Tax Rates?

The following 11 states have a sales tax between 2% and 5%: Alabama (2%), Colorado (2.9%), Hawaii (4%), Louisiana (4%), Missouri (4.23%), New Mexico (4%), New York (4%), North Carolina (3%), Oklahoma (3.25%), South Dakota (4%), and Virginia (4.15%).

Which States Have the Highest Combined State and Local Sales Tax?

Statewide sale taxes are found in 45 U.S. states, while local sales taxes are found in 38 states. States with the highest combined state and local sales tax include Alabama (5.22%), Louisiana (5.07%), Colorado (4.75%), New York (4.52%), and Oklahoma (4.45%).

The Bottom Line

Because state tax laws are unregulated, each state can decide how much to charge for its base sales tax. States like New York and California have high sales tax rates, while Delaware, Montana, and New Hampshire have lower rates. Depending on where you live and travel, the paying (or not paying) sales tax will become part of your overall budget.

Sales taxes pay for services like schools and infrastructure, so living in a state without a high sales tax means that money will come from other taxes.

Article Sources
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  1. New York City Department of Finance. "New York State Sales and Use Tax."

  2. Federation of Tax Administrators. "State Sales Tax Rates and Food & Drug Exemptions," Page 1.

  3. State of Alaska, Department of Commerce, Community, and Economic Development. "Alaska Taxable 2018," Page 19-20.

  4. Delaware Division of Revenue. "Gross Receipts Tax FAQs."

  5. Government of Delaware. "Alcoholic Beverage Tax," Page 65.

  6. Delaware Division of Motor Vehicles. "Motor Fuel Special Fuel."

  7. Government of Delaware. "Corporate Income Tax FAQs."

  8. Delaware Division of Revenue. "Step 4: Learn About Gross Receipts Taxes."

  9. State of Delaware. "Delaware Property Tax Rates, 2016 - 2017," Page 2.

  10. Tax Foundation. "State and Local Sales Tax Rates, 2022."

  11. KPMG. "Puerto Rico - Indirect Tax Guide."

  12. Montana Department of Revenue. "Local Resort Tax."

  13. New Hampshire Department of Revenue. "Frequently Asked Questions - Meals and Rooms (Rentals) Tax."

  14. Town of Exeter New Hampshire. "Timber Tax (Yield Tax)."

  15. New Hampshire Department of Revenue Administration. "Taxpayer Assistance - Overview of New Hampshire Taxes."

  16. Oregon Legislature. "Chapter 473 — Wine, Cider and Malt Beverage Privilege Tax."

  17. Oregon Department of Revenue. "Cigarette Tax Overview."

  18. City of Ashland. "Food and Beverage Tax."

  19. Tax Foundation. "State Individual Income Tax Rates and Brackets for 2022."

  20. Oregon Department of Revenue. "How Property Taxes Work in Oregon."

  21. The University of Wyoming and the United States Department of Agriculture cooperate. "Wyoming Tax Facts."

  22. Inuit Turbo Tax. "States with the Lowest Taxes and the Highest Taxes."

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