The 5 U.S. States Without a Statewide Sales Tax

Where to Do Your Purchasing in the U.S.

•••

 © The Balance, 2018

Almost every state in the country has a sales tax—45 of them plus the District of Columbia to be exact. As of 2018, rates range from a high of 7.25 percent in California to just 2.9 percent in Colorado.

Most states also allow local counties, cities, and municipalities to add their own separate sales taxes to the state rate, but there are a few consumer-friendly exceptions. 

States Without a Sales Tax 

Only five states do not have a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. But this list is a little misleading because Alaska does allow localities to impose sales taxes and they average 1.76 percent – not huge, but it's not zero, either. Montana also allows local sales taxes. 

Delaware doesn't have a sales tax, but it does impose a gross receipts tax on businesses. It's a percentage of total receipts from goods sold and services rendered within the state. This tax ranges from .1006 percent to .7543 percent as of 2018. Although it's not technically charged to consumers, its effect can nonetheless be felt in the sales prices of goods and services.

States with Low Sales Taxes

Among states that do have a sales tax, some are less significant than others. Thirteen states impose taxes of 5 percent of the purchase price or less, including five states where the tax is just 4 percent. As of 2018, they include:

  • Alabama (4%) 
  • Colorado (2.9%)
  • Georgia (4%)
  • Hawaii (4%)
  • Louisiana (5%)
  • Missouri (4.225%)
  • New York (4%)
  • North Carolina (4.75%)
  • North Dakota (5%)
  • Oklahoma (4.5%)
  • South Dakota (4.5%)
  • Wisconsin (5%)
  • Wyoming (4%)

New Mexico just inches over the 5 percent line at 5.125 percent.

Combined State and Local Taxes

Thirty-eight states collect sales tax at both the state and local levels as of 2018. Only Connecticut, Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, Oregon, Rhode Island, and the District of Columbia do not permit local sales taxes.

This makes Montana, New Hampshire and Oregon the only states that truly do not impose any sales taxes at all or extra taxes that can trickle down to the consumer.

The local sales tax in some states is pretty negligible, however. Idaho's average is just 0.03 percent as of 2018 and Mississippi's average is 0.07 percent. And when all of New Jersey's local taxes are averaged out, it actually works out to a negative number: -0.03 percent.

Among states that do allow for a combined sales tax, Louisiana, Tennessee, Alabama, Arkansas, and Washington have the highest rates when state and local taxes are added together. These combined rates range from 9.10 percent in Alabama up to 10.02 percent in Louisiana as of 2018.

On the other end of the spectrum, Hawaii, Wisconsin, and Wyoming have the lowest combined rates: 4.35 percent in Hawaii, 5.46 percent in Wyoming, and 5.42 percent in Wisconsin.

Exemptions from State Sales Taxes

Many of the states that have sales taxes exempt food, but Alabama, Hawaii, Idaho, Kansas, Mississippi, Oklahoma, and South Dakota do include food items from their state sales taxes.

Some states charge a lesser sales tax on food items, including:

  • Arkansas (1.5%) 
  • Illinois (1%)
  • Missouri (1.225%)
  • Tennessee (5%)
  • Utah (3%)
  • Virginia (2.5%)

Food is subject to local sales taxes even if it's exempt from state sales taxes in a few states, including Georgia, Louisiana, North Carolina, and Tennessee. 

All states except Illinois exempt prescription drugs from state and local sales taxes. Prescription drugs are subject to a 1-percent sales tax in Illinois. 

A handful of states also exempt non-prescription drugs from sales taxes, including: 

Clothing is exempt from state sales taxes in a few states, mainly in the Northeast. These include: Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, and Rhode Island.

Working It Out

Both businesses and savvy consumers adjust when combined tax rates become prohibitive.

It's not uncommon for some New Jersey residents to cross over the border to shop in Delaware – it's often cheaper, even with that gross receipts tax at play. In fact, New Jersey has taken steps to address this, exempting Salem County – which abuts the state line – from collecting New Jersey's 6.625 percent sales tax.

The state doesn't waive the tax for these residents entirely, however. It reduces it by half in an attempt to lure more consumers into doing their shopping at home. 

Likewise, many Chicagoans go outside the city for their purchases. They pay a combined sales tax of a whopping 16.5 percent when they buy within city limits – 10.25 percent at the local level plus 6.25 percent at the state level. It's worth it to drive a little to make purchases.