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List of states with no income tax or sales tax
By Jonathan Weber, Tax-Rates.org
There are a total of nine states with no or limited income taxes, and five states with no statewide sales tax. Of these, there are only two states that have both no state income tax and no sales tax:
- Alaska – Alaska has no statewide income tax, and no statewide sales tax – but local governments are allowed to collect a local sales tax of up to 7.5%. Alaska has consistently ranked as the state with the lowest tax burden in the nation.
- New Hampshire – New Hampshire has no statewide income tax (although it does collect income tax on dividend and interest income), and no statewide or local sales taxes. Like Alaska, New Hampshire consistently ranks among the top five lowest taxing states in the nation.
Although both Alaska and New Hampshire have notably low combined tax burdens, both of them – especially New Hampshire – have higher median property taxes than most other states.
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List of states with no income tax
By Jonathan Weber, Tax-Rates.org
A total of seven states have no state income tax, and two states tax only interest and dividend income. Forty-one states and the District of Columbia collect a general state income tax. Here’s a list of the seven states with no personal income tax as of 2012:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
Two states do not tax normal income, and only collect an income tax on income from dividends and interest income:
- New Hampshire
- Tennessee
If you live in any of these states, you do not have fo file a state income tax return and are only responsible for paying federal income taxes on your income.
While residents of these income-tax-free states do have a significantly lower income tax burden then those in high-tax states like California or Oregon, some of these states make up for lost tax revenue by raising other taxes like sales taxes, property taxes, and excise taxes.
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Which states have no statewide sales tax?
By Jonathan Weber, Tax-Rates.org
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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