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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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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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Sales tax refunds in the United States
By Jonathan Weber, Tax-Rates.org
If you are a foreign national visiting the United States as a tourist or a foreign company looking to purchase goods or supplies in the United States, you may be able to get a full refund of the sales tax you pay on qualifying purchases.
Note that unlike countries with a VAT that offer VAT refunds, sales taxes in the United States are handled by state governments and as a result there is no central bureau that can handle tax refunds across multiple states.
In order to gain a sales tax refund on purchases made, you’ll have to work directly with the Department of Revenue in each state you purchase from. Please note that some states will limit refunds or exemptions to purchases of more then $500 USD.
Note that unlike countries with a VAT that offer VAT refunds, sales taxes in the United States are handled by state governments and as a result there is no central bureau that can handle tax refunds across multiple states.
In order to gain a sales tax refund on purchases made, you’ll have to work directly with the Department of Revenue in each state you purchase from. Please note that some states will limit refunds or exemptions to purchases of more then $500 USD.
No Sales Tax Collected, No Refunds Necessary
These states collect no sales tax on any purchases, so no sales tax refund is necessary:
AK / DE / OR / NH / MT
Obtaining Sales Tax Exemption Forms OR Sales Tax Refunds
All states that DO collect sales taxes should be able to offer either an exemption certificate or information on getting your sales tax refunded for one of two reasons:
- You are purchasing goods for export from the United States
- You are purchasing goods for resale or as raw materials (most state sales taxes do not apply to sales to entities who are not the final consumer)
If you are making significant purchases in any state, you will need to contact their Department of Revenue’s sales tax division and state your intended purchases and your status as a resale business or exporter. Some states, including Louisiana, have sales tax refund offices located in transport hubs and airports where travelers can get sales tax refunds directly.
States without dedicated refund offices will be able to provide you with either a sales tax exemption form to present to merchants instead of paying sales tax, or information on getting your sales tax refunded directly after the purchase is made. In some states, sales tax must be collected on all purchases made in-state but refunds may be issued once the buyer can provide “acceptable proof” of exporting the goods purchased.
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