This blog was last updated on June 23, 2025
In a country where sales tax is the norm, a handful of states stand out for going against the grain—they don’t impose any statewide sales tax at all. That’s right—no last-minute filings, no scrambling to collect and remit every month. At least, not for sales tax. But before you pack your headquarters and head for the border, there’s more to the story.
So which states said “no thanks” to taxing retail sales? And what does that really mean for your businesses, especially in a world where economic nexus laws still apply and local jurisdictions may have rules of their own? Explore the five U.S. states with no sales tax and what smart businesses should consider before calling them tax havens.
Which States Have No Sales Tax?
As of 2025, Alaska, Delaware, Montana, New Hampshire, and Oregon do not collect state-level sales tax. These five states have opted out of traditional sales tax structures, though some—like Alaska—may still allow local jurisdictions to impose their own sales taxes.
1. Alaska
Alaska doesn’t impose a statewide sales tax, but that doesn’t mean businesses are entirely off the hook. Many boroughs and municipalities charge their own local sales taxes, with rates climbing as high as 7.5%. These rates vary significantly by location, meaning compliance isn’t as straightforward as it may seem.
For businesses selling in or shipping to Alaska, this patchwork system requires careful attention. What’s tax-free in Anchorage may be fully taxable in Kodiak, so using a local sales tax lookup tool is essential to stay compliant and avoid costly mistakes.
2. Delaware
Delaware is one of the only states with zero sales tax—state or local. It’s also a corporate favorite, known for its pro-business laws and minimal red tape. For online sellers, holding companies, and incorporation seekers, Delaware is a magnet.
However, while there’s no traditional sales tax, Delaware does impose a Gross Receipts Tax on the total receipts of a business. Unlike sales tax, this is paid by the business and cannot be passed directly to consumers, potentially impacting margins.
3. Oregon
Oregon is a true no-sales-tax state meaning no local, and no hidden retail sales taxes. This makes it especially appealing for businesses with high transaction volumes, as the total price to consumers can be lower without the added burden of sales tax at checkout.
But while businesses benefit from simplified sales tax compliance, the state recoups revenue through higher income and excise taxes, which can affect overall operating costs. For business leaders, it’s important to weigh the savings on sales tax against potential increases in other tax obligations when building long-term cost projections.
4. Montana
Montana has no statewide or local sales tax, making it one of the most tax-friendly states in the country when it comes to retail transactions. The only exceptions are a handful of resort areas that impose a local “resort tax” on specific goods and services like lodging, food, and alcohol.
For most B2B transactions, Montana offers a low-friction environment—particularly appealing for eCommerce sellers and manufacturers looking to establish a footprint with minimal compliance complexity. For businesses, this translates to fewer tax collection obligations and simpler checkout processes, though it’s still essential to stay informed about local tax nuances in tourism-heavy regions.
5. New Hampshire
New Hampshire is known for its pro-business tax climate and does not levy any state or local sales tax. This makes it an attractive option for companies selling goods both in-state and across state lines, as it eliminates the burden of tracking and collecting sales tax on retail transactions.
However, the state does generate revenue through other channels, including Business Profits Tax (BPT) and Business Enterprise Tax (BET). For larger businesses with significant revenue or payroll, these taxes can add up. While the lack of sales tax reduces front-end compliance, companies still need to factor in these corporate-level taxes when evaluating long-term operating costs in New Hampshire.
Why Do Some States Not Have a Sales Tax?
Just because certain states do not tax sales does not mean they’re “tax-free.” They’ve instead crafted tax structures that rely on other mechanisms to fund public services, infrastructure, and education without taxing retail sales of goods and services. The five states that do not charge a statewide sales tax often capitalize on alternative revenue streams, including:
- Higher income or property taxes
While they may lack a state and local sales tax, some of these states impose higher corporate income tax, personal income tax, or property taxes to make up the difference.
- Natural resource taxes
Taxes on natural resources provide a substantial portion of state revenue for states including Alaska. In addition, local jurisdictions in Alaska are allowed to impose local sales taxes, so while the state doesn’t have a blanket sales tax, some cities do.
- Tourism and excise taxes
States like Montana and New Hampshire capitalize on tourism by imposing excise taxes and local option taxes on things like lodging, alcohol, and meals. These targeted taxes help capture revenue from non-residents, easing the burden on locals while still funding government programs.
- Business and corporate activity fees
Delaware does not impose a sales tax on gross sales, but it’s a popular place for business incorporation due to its favorable corporate laws. Many companies with a physical presence in a state like Delaware may not collect and remit traditional sales taxes, but they are still subject to other business-related obligations.
The trade-off allows these states to market themselves as low-cost-of-living or business-friendly, appealing to residents and entrepreneurs alike. For businesses, this means a holistic tax strategy is key. Saving on sales tax might be offset by other obligations.
Sales Tax vs. Income Tax: What’s the Real Benefit?
The trade-off between sales tax and income tax affects everything from gross sales strategy to corporate tax planning. Businesses need to evaluate the full picture—not just whether they’ll need to collect and remit sales tax, but how other tax structures could impact their margins, growth plans, and long-term profitability.
Frequently Asked Questions
- Is it better to live in a state with no sales tax?
In short, there’s no one-size-fits-all answer. The real benefit comes from understanding how a state’s full tax structure—including income, sales, property, and local taxes—aligns with your financial goals. - Are there local sales taxes in states with no state sales tax?
Even if a state doesn’t have a statewide sales tax, it may still permit local sales taxes. Businesses must pay attention to local tax rates to ensure accurate compliance. - How do states with no sales tax make money?
States with no sales tax generate revenue through alternative methods such as income taxes, property taxes, excise taxes, corporate income taxes, and fees on business activity. - How can I shop tax-free online in states with sales tax?
Shopping tax-free online is increasingly difficult due to economic nexus laws stemming from the 2018 South Dakota v. Wayfair decision. Most states now require out-of-state sellers to collect and remit sales tax if their gross sales or number of transactions exceed a certain threshold—even if the seller has no physical presence in a state.
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