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States with No Sales Tax

written by: Heidi McIntyre•edited by: Michele McDonough•updated: 5/31/2010

Many states to not have sales tax. In fact, there are five states that proudly boast that they are indeed "sales tax free." Read on for more information about these five states, including details of other types of taxes that are imposed in lieu of sales tax.

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    Sales Tax Free

    States with No Sales Tax Sales tax is a driving force of revenue in most states. However, there are a select few states that do not collect sales tax.

    Many people who inhabit these states enjoy the freedom of purchasing items without additional costs. Five states claim host to the title sales tax-free. Alaska, Delaware, Montana, New Hampshire, and Oregon do not collect sales tax.

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    Summary of States That Do Not Have Sales Tax

    Alaska - As mentioned above, Alaska does not collect sales tax. Petroleum drives the economy in Alaska, and its government does not need to collect additional revenue to fund the Alaskan economy. In fact, Alaska pays its residents to live there. Every resident, including children, receives a payment or dividend each year from the Alaska Permanent Fund Corporation.

    Delaware does not collect sales tax from its residents. However, the state does collect a tax on the gross receipts of most businesses. Gross receipt means that business expenses are not figured into the sales revenue. Therefore, it is the responsibility of each individual business to turn in their sales records to the state government. Business owners shoulder the burden of a sales tax not paid by each customer.

    Montana does not collect sales tax but does collect income and property tax. Montana's natural resources – such as coal, forests, oil, and natural gas – help supplement the state's economy. In addition, only Oregon's tax collection system mirrors Montana's. Montana is one of the only states that allows residents to fully deduct their federal income tax from their adjusted income when filing taxes.

    New Hampshire - Residents who live in New Hampshire do not have to pay sales tax. They do however have to pay meal and rental taxes. Visitors and residents can expect to pay an 8% tax when they visit hotels and restaurants. Car rentals are also subject to the 8% sales tax. On an interesting note, New Hampshire is one of the only states to have a gravel tax. Residents who remove more than 1,000 cubic yards of gravel are subject to a tax whether it is sold or gifted.

    Oregon's state government mirrors the Montana sales tax structure. Oregon collects both income and property taxes. Oregon boasts itself as a major tourist destination and uses their tax free platform as a springboard to an incentive to visit Oregon.

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    The Future of Sales Tax Free States

    The economic climate within the United States will dictate the future of each state's sales tax free status. The federal government may not have the resources to fund many state programs. Gone are the times of plenty, and state governments need to look at their budgets closely. Some states may have to start collecting sales tax in the future to fund programs that were previously supported by the federal government.

    The fight for sales tax collection may be closer than many realize. In Ashland, Oregon, many residents see the bed and hospitality tax as a springboard to something bigger. Some restaurateurs feel that the bed and hospitality sales tax extension is unfair and were displeased to hear that residents voted to extend the tax for another twenty years in 2008. Voters feared that their state government would have enacted a broader sales tax if the bed and hospitality tax was not passed. Furthermore, voters counted on Oregon's tourists to fund the bed and hospitality tax. Therefore, the tax would not be a heavy burden for local residents.

    As economic woes continue to grow across the United States, so too does the outlook for sales tax amnesty. The sales tax free outlook is bleak. However, states that do not have sales tax do have other taxes to offset the deficit lost from sales tax. The current state of the economy will determine if sales tax will be collected in the future. Until then, many people continue to enjoy the benefits which stem from a sales tax free state.