You Just Might Want To Plan Your Next Vacay in One of These States That Has No Sales Tax
In a country where sales taxes are an integral part of consumer transactions, there are a handful of states that stand out for folks looking to make their money stretch a bit further. No doubt, when shopping, sales tax can impact your overall bill—even if you're the biggest bargain-hunter out there. You can run, but you can't hide from your state sales taxes. Unless, however, you live in one of the few states with no sales tax.
That's right. In the United States, not all states are created equally when it comes to sales tax rates. States that have completely abolished sales taxes seem like an anomaly since many state governments rely on these taxes for their budgets. Additionally, there are some states that have opted for a lower sales tax rate than most, which also attracts bargain hunters.
For some states, the decision to opt out of sales taxes is a strategic one in attracting tourists, consumers and businesses alike. But, the implications of these seemingly-attractive tax policies play a vital role in shaping local economies, the cost of living for residents and more. If you're planning a move or are simply curious about which states have no or low sales taxes, read on.
States With No State Sales Tax
There are five states in the U.S. with no state sales tax. Drumroll, please! The five states are Alaska, Delaware, Montana, New Hampshire and Oregon. Each of these states has chosen not to impose a general sales tax on most goods and services sold within their borders. Hence, these five states seem like a haven for folks who enjoy retail therapy.
Regardless, these states with no states sales taxes still have taxes to pay. No one is free from that one! In Alaska, local sales taxes are allowed and many municipalities impose a sales tax. Delaware imposes a gross receipts tax on the sale of certain goods and services. Montana allows local resort taxes to certain communities. Not to mention, there are income taxes.
States With Low Sales Tax Rates
Despite there being a small number of states with 0% sales tax, there are a handful of states across the U.S. with notably lower sales tax rates. States with sales tax rates below the national average include Alabama, Georgia, Hawaii, Louisiana, New York Oklahoma, South Dakota and Wyoming. Keep reading to learn the exact sales tax rates of each state.
States With Highest Combined State and Local Taxes
Along with state sales taxes come local sales taxes, which is a whole other ball game. According to TaxFoundation, the states with the highest average combined state and local taxes are Louisiana, Tennessee, Arkansas, Alabama and Oklahoma. The states with the lowest average combined state and local taxes are Alaska, Hawaii, Wyoming, Wisconsin and Maine.
Exemptions from State Sales Taxes
There are certain consumer goods and services that are exempt from the imposition of state sales taxes. Exact exemptions vary from state to state and can get very specific. However, many states uphold similar sales tax exemptions, including:
Groceries
Prescription medications
Medical equipment
Education materials and supplies
Nonprofit or charitable purchases
In nearly every state, prescription medications are tax-exempt. This helps in making healthcare more affordable and ensures that folks are able to get the medications and treatment they need. Illinois is the exception, with prescription drugs being taxed at the state level. Nonprescription medications, however, are often taxable.
What State Sales Tax Means for You
As defined by Shopify, a sales tax is a consumption tax imposed by state or local governments on the sale of goods or services consumers pay when making a purchase. Sales taxes raise revenue for local and state governments, and there are many purchases that are subject to sales taxes.
So, what does state sales tax mean for you as a consumer? Depending on where you live, there are state sales taxes that you need to account for when shopping for certain goods and services. The sales tax rate varies from state to state and may also differ within local jurisdictions.
Do you know what your state's sales tax rate is?
Related: These Are the World's Most Expensive Cities to Live In
How Do States Without Sales Tax Make Money?
It may seem like a dream to live in a state that's free of sales taxes—especially if you reside somewhere with a higher state sales tax rate. But, it also poses the question: how do states without sales taxes make money? After all, sales taxes are used to pay for education, health care, criminal justice and more.
These states rely on alternative revenue sources like tourism, as well as money from other tax sources—AKA income taxes and property taxes.
According to Michael Leachman, vice president for state fiscal policy at the Center on Budget and Policy Priorities, a major source of revenue in the sales-tax-free state of New Hampshire is its business taxes and local property taxes. Residents in New Hampshire pay the country’s fourth-highest property tax at a rate of 2.09%. So, although these states may be free of sales taxes, residents make up for it with other taxes.
What Is My State's Sales Tax?
Review the list below to find out what your state's sales tax percentage is.
Alabama: 4%
Alaska: 0%
Arizona: 5.60%
Arkansas: 6.50%
California: 7.25%
Colorado: 2.90%
Connecticut: 6.35%
Delaware: 0%
D.C.: 6%
Florida: 6%
Georgia: 4%
Hawaii: 4%
Idaho: 6%
Illinois: 6.25%
Indiana: 7%
Iowa: 6%
Kansas: 6.50%
Kentucky: 6%
Louisiana: 4.45%
Maine: 5.50%
Maryland: 6%
Massachusetts: 6.25%
Michigan: 6%
Minnesota: 6.875%
Mississippi: 7%
Missouri: 4.225%
Montana: 0%
Nebraska: 5.50%
Nevada: 6.85%
New Hampshire: 0%
New Jersey: 6.625%
New Mexico: 5%
New York: 4%
North Carolina: 4.75%
North Dakota: 5%
Ohio: 5.75%
Oklahoma: 4.50%
Oregon: 0%
Pennsylvania: 6%
Rhode Island: 7%
South Carolina: 6%
South Dakota: 4.50%
Tennessee: 7%
Texas: 6.25%
Utah: 6.10%
Vermont: 6%
Virginia: 5.30%
Washington: 6.50%
West Virginia: 6%
Wisconsin: 5%
Wyoming: 4%
