Which states have no statewide sales tax?
While forty-five states and the District of Columbia do collect a statewide sales tax, there are a total of five states that do not collect a any statewide sales tax – Alaska, Delaware, Montana, New Hampshire, and Oregon. many of these “tax-free” states, however, do impose similar taxes on certain purchases or allow local governments to collect a limited sales tax.
- Alaska – While Alaska does not collect a statewide sales tax, over 100 cities and municipalities do collect a local sales tax ranging from 1% to 7.5%. Certain products and services used by tourists, like cruises and car rentals, are also subject to special excise taxes.
- Delaware – Delaware, a state known for low taxes, has no statewide sales tax and does not allow cities to collect a sales tax. However, Delaware does collect a “gross receipts tax” on most business’s sales, which can translate into higher prices for end consumers.
- Montana – Montana collects no state or local sales taxes. Like Alaska, however, special taxes aimed at tourist-frequented purchases of up to 3% can be enacted at a local level.
- New Hampshire – New Hampshire has no sales tax on general consumer products or services, although it does tax lodging, car rentals, and prepared food.
- Oregon – Oregon has no statewide sales tax, although a few municipalities do collect limited sales taxes on items like prepared food.
The absence of a statewide sales tax makes these five states significantly cheaper locations for large consumer purchases. Buyers from states that do have a statewide sales tax, however, can’t legally enjoy the benefits of buying tax free.
Use tax laws in all states that currently collect a sales tax require any citizens who make a purchase in a state with a lower sales tax to pay the sales tax they would have paid as a self-reported use tax on their yearly tax returns. While the use tax is difficult to police and often ignored, some states do make a point of pursuing individuals for use tax evasion on large purchases.
The lack of a statewide sales tax isn’t always good for state residents, however. While most states use higher sales taxes to close budget gaps, taxpayers in these five states may have to endure higher income, property, or corporate taxes to make up for lost sales tax income.
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