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.