Discover U.S. States With No Sales Tax
Industry Insights
What does sales tax mean?
Sales tax is a consumption tax applied to the exchange, sale, or transfer of goods or services. Typically, it is added to the retail sales price, collected by the retailer at checkout, and paid by the consumer. In the United States, there is no federal or national sales tax; instead, sales tax is imposed and managed by state and/or local governments, such as cities, counties, and special districts. With over 13,000 sales and use tax jurisdictions nationwide, many of which overlap, compliance can be challenging for businesses. Sales tax rates differ between jurisdictions and can change over time. Certain products and services are entirely exempt from sales and use tax by law, and some typically taxable transactions may be exempt under specific circumstances, requiring businesses to validate the exemption with an exemption certificate. Sales tax is calculated as a percentage of the sales price. For instance, the total sales tax rate in Alameda, California, is currently 10.75%, encompassing various state and local rates.
What are the states with no sales tax?
As of 2024, five states in the U.S. do not impose a statewide sales tax. These states are collectively known as the "NOMAD" states, which stands for New Hampshire, Oregon, Montana, Alaska, and Delaware. Each of these states has adopted unique fiscal policies to compensate for the absence of sales tax revenue. Here's a brief overview of each state:
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Alaska: While Alaska does not have a statewide sales tax, more than 100 local governments in Alaska levy a local sales tax.
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Delaware: Delaware does not have a sales tax but does have a rental tax of 1.991%.
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Montana: Montana does not impose a statewide sales tax.
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New Hampshire: New Hampshire does not have a sales tax and relies heavily on personal income taxes to fund its budget.
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Oregon: Oregon does not have a sales tax and focuses on income taxes and other revenue sources to fund public services.
Understanding your sales tax duties in various states
Even in states with no sales tax, businesses may still have sales tax duties to consider. For example, while the NOMAD states do not have a general statewide sales tax, they may still tax certain transactions. Additionally, businesses operating in states with no sales tax may still need to comply with use tax regulations, which apply to items purchased in one state and used in another. Furthermore, businesses should be aware of any local taxes that may apply, even in states without a statewide sales tax. For instance, in Alaska, local governments can impose their own sales taxes.
In states with sales tax, businesses are generally required to collect sales tax from customers at the point of sale and remit it to the state. Retailers act as tax collectors for the state, and they must ensure they are collecting and remitting the correct amount of tax based on the applicable rates and rules. This can involve understanding the different rates for various products and services, as well as any exemptions that may apply.
Understanding and complying with sales tax duties is crucial for businesses to avoid legal and financial penalties. It is recommended that businesses consult with tax professionals or use tax compliance software to ensure they are meeting their sales tax obligations in all states where they operate.
The information provided in this article is for informational purposes only and does not constitute professional advice or recommendations. All data and content are sourced from public news, reports, or relevant market trends but have not been independently verified. While every effort has been made to ensure the accuracy of the information provided, PhotonPay make no guarantees regarding its completeness, reliability, or timeliness. Readers should independently verify the information and seek professional advice when necessary before making any decisions.
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