5 States With No State Sales Tax
Alaska, Delaware, Montana, New Hampshire and Oregon do not impose a state sales tax, but that doesn't necessarily make them the best states for low taxes.
Many people don't factor in sales taxes when they're looking at the tax-friendliness of different states. That's a mistake. Forty-five states plus the District of Columbia impose a sales tax. In addition, local sales tax is collected in 38 states. The combined state and local levy can be hefty, too. In fact, in Tennessee (which took the top spot in our round-up of the 10 States With the Highest Sales Tax), the average combined state and local sales tax is 9.55%, according to the Tax Foundation. That's a big bite out of your wallet every time you make a purchase.
On the flip side, for states that don't impose a sales tax — Alaska, Delaware, Montana, New Hampshire and Oregon — residents are often hit hard with other taxes (like income or property taxes). Afterall, money for roads and schools has to come from somewhere. New Hampshire, for example, has some of the highest real estate taxes in the country. In Oregon, income tax rates can be as high as 9.9%, which is the fourth-highest top rate in the nation.
The information below will help you understand more about what you will really pay to live in the five states with no sales tax. For each state, we've also included a link to our full guide to state taxes for middle-class families to help you put these shopping destinations in perspective.
Income tax brackets are 2020 values, unless otherwise noted. Property tax values are for 2019, the most recent data available.
Alaska
Overall Rating for Middle-Class Families: Most tax-friendly
Sales Tax: While the Last Frontier has no state sales tax (or else it wouldn't be on this list), localities can levy sales taxes, which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is only 1.76%. That's the lowest combined average rate for states that impose either state or local sales taxes.
Income Tax Range: No state income tax.
Property Taxes: In Alaska, the median property tax rate is $1,182 per $100,000 of assessed home value, which is above the national average.
For details on other state taxes, see the Alaska State Tax Guide for Middle-Class Families.
Delaware
Overall Rating for Middle-Class Families: Most tax-friendly
State Sales Tax: Delaware has no state or local sales taxes. It's interesting to note that, in response, New Jersey halved its sales tax in Salem County, which borders Delaware.
Income Tax Range: Low: 2.2% (on taxable income from $2,001 to $5,000). High: 6.6% (on more than $60,000 of taxable income). The top rate is middle-of-the-road when compared to other states. Wilmington also imposes a city tax on wages.
Property Taxes: For Delaware homeowners, the median property tax rate is $562 per $100,000 of assessed home value -- the lowest among the states featured on this list.
For details on other state taxes, see the Delaware State Tax Guide for Middle-Class Families.
Montana
Overall Rating for Middle-Class Families: Tax-friendly
State Sales Tax: No state sales tax, but some resort destinations such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.
Income Tax Range: Low: 1% (on up to $3,100 of taxable income). High: 6.9% (on more than $18,400 of taxable income). Dollar figures for 2020 are not available yet, so 2019 amounts are shown.
Property Taxes: For homeowners in Montana, the median property tax rate is $831 for every $100,000 of assessed home value.
For details on other state taxes, see the Montana State Tax Guide for Middle-Class Families.
New Hampshire
Overall Rating for Middle-Class Families: Mixed tax picture
State Sales Tax: None.
Income Tax Range: New Hampshire doesn't have an income tax. But there's a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).
Property Taxes: The median property tax rate in New Hampshire is $2,050 for every $100,000 of assessed home value.
For details on other state taxes, see the New Hampshire State Tax Guide for Middle-Class Families.
Oregon
Overall Rating for Middle-Class Families: Not tax-friendly
State Sales Tax: None.
Income Tax Range: Low: 4.75% (on up to $7,200 of taxable income for married joint filers and up to $3,600 for single filers). High: 9.9% (on more than $250,000 of taxable income for married joint filers and more than $125,000 for single filers). Dollar figures for 2020 are not available yet, so 2019 amounts are shown.
A "kicker" tax credit may be available on tax returns for odd-numbered years. The credit is authorized if actual state revenues exceed forecasted revenues by 2% or more over the two-year budget cycle.
Property Taxes: The median property tax rate for Oregon homeowners is $903 per $100,000 of assessed home value.
For details on other state taxes, see the Oregon State Tax Guide for Middle-Class Families.
