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Pay Low (or No) Sales Tax in These 6 States

You might be able to save on goods and services with a short car ride, or by shopping during travel. Plus, which states will hit your wallet the hardest.
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If you live near your state's border, savings could be just a road trip away! In fact, there are entire states you can shop in that are free of sales tax.

Today, five states collect zero state sales taxes. And local sales taxes are collected in only 38 states, according to the Tax Foundation. If you're looking to go duty-free (or close to it) on your next shopping trip, here are the six states with the lowest state and local taxes on goods and services.

SEE ALSO: Pennsylvania 'Netflix Tax' Could Become an Expensive Trend

6 States with the Lowest (or No) Sales Tax

Alaska

State Sales Tax: 0%

Local Sales Tax: 1.78%

The Last Frontier is one of only five states to charge zero sales tax, and is one of two 0% sales tax states that allow local municipalities to levy a sales tax (the other is technically Montana). As of January 1, 2016, the average local sales tax rate in Alaska was 1.78%, making for a combined sales tax rate of the same.

Delaware

State and Local Sales Tax: 0%

Shopping in the tri-state area of New York, New Jersey, and Connecticut won't net you any sales tax-free savings, but jump onto I-95 and head down to Delaware for 0% sales tax, statewide and locally. For proof that Delaware lawmakers are proud of the sales-tax-absent culture, consider that road signage upon entering the first U.S. state reads, "Welcome to Delaware: Home of Tax-Free Shopping."

Don't believe us? Take a look at this picture.

Montana

State and Local Sales Tax: 0% (with exceptions)

Big Sky Country may be beautiful for its wide-open expanses of land, mountains, and prairies, but visitors and residents alike can also bask in the glory of paying no sales tax in Montana. Who else can benefit? Canadians looking to save money just need to trek over to America for some shopping — but remember, one Canadian dollar is only worth 75 cents in U.S. currency, so their savings might be stymied. (Note that select Montana communities can levy resort and local option taxes.)

Oregon

State and Local Sales Tax: 0%

Oregon is recognized as one of the most progressive states in the country. Even with Portland as a rising consumer and tourist hotspot, lawmakers have kept in place a fiscally liberal structure that includes zero sales taxes of any kind at the state or local level.

The good news if you're an Idaho resident? You're bordered on either side by Montana and Oregon, so there's ample opportunity to escape your own state's 6% sales tax rate.

New Hampshire

State and Local Sales Tax: 0%

If you're in Maine (5.5% state sales tax) or Vermont (6% state rate), or don't mind journeying out from Boston, you might want to head over to New Hampshire. The New England region's only state without a definitive state or local sales tax, New Hampshire wouldn't be out of place if it changed its motto to "Sales Tax Free or Die."

Colorado

State Sales Tax: 2.9%

Local Sales Tax: 4.62% on average

Colorado's 2.9% state sales tax rate is less than half of many other states' rates, but prepare to be let down a bit: Colorado towns and cities charge a 4.62% local sales tax rate on average. That brings the combined state/local rate to 7.52%.

States With the Highest Sales Tax Rates

Since we're on the topic, some states boast high sales taxes that, like most interest rates, can make you spend more than you'd like.

Which state has the highest? That distinction goes to California, which currently imposes a 7.5% sales tax rate. Other states are tied for second on the list at 7%, including Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.

Among the major U.S. cities, Chicago, Seattle, and Oakland lay claim to the highest sales taxes. Each charge at least 9.5%.

But brace yourself: Local sales taxes can extend into the double digits. Among all the major U.S. cities, Chicago, Seattle, and Oakland lay claim to the highest sales taxes at 10.25%, 9.6%, and 9.5%, respectively.

Then again, the highest local sales taxes pop up in the smallest of cities. With its combo of state, county, and To'Nanees'Dizi tribe rates, Tuba City, Arizona carries the most expensive local sales tax in the country at 13.725%.

Feeling hungry? Most states exempt food purchases from their sales taxes — except for Alabama, Hawaii, Idaho, Kansas, Mississippi, Oklahoma, and South Dakota, where you'll pay an extra fee each time you hit the supermarket checkout line. But some states charge no sales tax on necessary purchases, like clothing or prescription drugs.

Where Does the Money Go?

Sales taxes are not federal. Each state controls how much it charges for sales tax — if anything — one reason why rates vary so much from state to state, or even from city to city. How states use their taxes varies, too. Together with income tax revenue, state governments spend sales tax proceeds on services such as the following:

  • Public education
  • Health care
  • Transportation
  • Corrections/prisons
  • Economic development and other programs

States with alternative funding sources may not have as great a need to charge sales tax. Alaska, for example, generates a great deal of revenue from oil and gas production, and federal subsidies. Delaware has no sales tax, but does levy a gross receipts tax on businesses. This type of surcharge doesn't directly affect shoppers, though vendors may offset the charge by raising prices.

Sales-tax-free states need to compensate for the lack of revenue somehow. States like Montana, Delaware, and New Hampshire rely on income tax to fill up their coffers. (Oregon's 9.9% income tax rate is among the highest in the country.)

SEE ALSO: Did You Fall for These 9 Shopping Myths?

So, if you'll be visiting a sales-tax-free state anytime soon, be a savvy shopper. Pay attention to price tags; comparison shop and look for the same items online to gauge if a retailer is gouging its prices to compensate for the lack of sales taxes. And whether you're in a small town or big city, research local tax rates, since they may be higher than their respective state taxes.

Readers, what's the sales tax like where you live? If you reside in a state that doesn't charge sales tax, do you feel like you're saving money? Let us know in the comments below!


Contributing Writer

Paul Sisolak is a freelance writer who covers a wide range of topics, including personal finance, automotive reviews, travel, news and trends, entertainment, and education. He has written and reported for U.S. News & World Report, Business Insider, Huffington Post, CNN Money, StudentLoanHero.com, and GOBankingRates.com.
DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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12 comments
mseidel
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mseidel
Paul,
Your article incorrectly stated "Sales-tax-free states need to compensate for the lack of revenue somehow. States like Montana, Delaware, and New Hampshire rely on income tax to fill up their coffers." New Hampshire has no state income tax (except on interest and dividends over a certain amount), nor sales tax. It gets its most of its money from alcohol sales, tourism, and property tax.
PNaw10
It wasn't clearly explained -- but perhaps should be -- that the "highest" rates, at 7.5% and 7%, are the highest STATE sales taxes in the country. In many states, there is an additional LOCAL sales tax which brings the overall "out of our pockets" rate even higher. A couple of particularly-high cities were mentioned, but in some states -- like New York -- local sales taxes are added to the state sales tax. New York's state sales tax is 4% but most counties double it, bringing the total to 8% or more. In New York City, it totals 8.875%. Although, there are plenty of exemptions such as food. Several years ago, the state abolished its share of sales tax on clothing & shoes under $120. However, it was voluntary for counties/cities. And don't try to jump from county to county to reduce sales tax on cars - taxes are based on where you live, not where you bought the car.
PNaw10
@vinaytampa - It appears Texas was not mentioned as among the "highest" because the author -- at least for the "highest rates" part of the article -- was only looking at the STATE sales tax. In Texas, the state imposes a 6.25% sales tax, and all that money goes right to the state piggybank in Austin. But local agencies (cities, counties, special purpose districts and transit authorities) can collect up to another 2% on top of that, reaching the 8.25% you mentioned.
royaltern
Virginia and North Carolina both tax groceries, albeit at a lower rate than their general sales tax. I think it's ca. 2 or 2.5%. And recently, NC extended its sales tax in a particularly pernicious way because it can become so expensive. They are now taxing services like the labor cost of car repair. Imagine how high the tax might become if it extends to the labor in home remodeling or to attorney services. Maybe a NC resident can add some information of the scope of this action.
chadley25
"This is idiotic and promoting illegal behavior. "
___________

The idiocy part is subjective, but can you cite the statute that makes it illegal for a person to drive across a state border to make a retail purchase? I'd be very interested to see that.
asting
This is idiotic and promoting illegal behavior. The fact that you seem to know nothing of use tax indicates you have no business posting this article
w1_m2
It is a sad commentary that elected officials have been elevated to the moniker of "LAWMAKERS", as citizens have been degraded to "TAXPAYERS".

Can we all strive to reverse this direction?
Greg the Gruesome
New York residents are required to report, on their income tax return, the sales tax "avoided" when a purchase is made out of state for which they would have paid sales tax had the purchase been made in New York, and pay an equal amount of "use tax". I presume other states have similar laws. This article should have mentioned this, even though I imagine you'd get nailed for violating this law only if you buy a very expensive item for which you don't pay cash, you later get audited for some other reason, and the tax agency notices the transaction in your bank account records.
vinaytampa
Why is Texas not mentioned at 8.25%?
ELURIE
Lawmakers haven't kept no sales tax in Oregon the voters have. Oregon may have no sales tax but we have the highest income tax in the country.
johnnylately
Tennessee charges sales tax on food, just not as much as a non-food purchase. But as a bonus to those of us who live here, there is no state income tax (aside from "fees" and such for "professionals").