Which States Have the Lowest Sales Tax?

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Which States Have the Lowest Sales Tax?

Sales tax rules in the United States are not regulated by the federal government, and each state has jurisdiction over its own sales tax. Retail purchases and some services are subject to sales taxes.

Regardless of whether a state has a state sales tax, local towns and counties may levy excise or surtaxes. For example, New York State’s sales tax is 4%, but New York City adds extra taxes, raising the rate to 8.875%.

Alaska, Delaware, Montana, New Hampshire, and Oregon will all have a 0.000% sales tax by 2022. Individual towns in each of these states, however, may levy excise taxes, income taxes, and tourist-related taxes.

Key Takeaways

  • State sales tax may affect both big and small purchases by raising the amount you pay beyond the sticker price.
  • Sales tax produces income for state-wide operations, however five states, including Alaska, Delaware, Montana, New Hampshire, and Oregon, do not now levy a state sales tax.
  • California has the nation’s highest sales tax.

1. Alaska

While Alaska has no enforced state sales tax, local governments may charge taxes on certain products and services. Juneau has a 5% sales tax, whereas Anchorage and Fairbanks do not, and the statewide average for municipalities is 1.76%.

2. Delaware

Delaware charges a gross receipts tax on select enterprises rather than a sales tax. Delaware heavily relies on excise taxes charged at a set rate per gallon on items such as gasoline and alcohol.

The state charges extra taxation on specified distributors of goods and services, enabling the state to have a 0% property tax and sales tax.

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California has the highest sales tax of any state in the country. Puerto Rico, a non-state territory, imposes a sales tax of 11.5%.

3. Montana

Overall, the state of Montana charges a 0% sales tax; however, towns in Montana that attract a high number of visitors apply minor sales taxes of up to 3%, known as a resort and local option tax, to fund tourism infrastructure. A community must have a permanent population of less than 5,500 to qualify for this tax, and these cities include Whitefish, Red Lodge, Big Sky, and West Yellowstone.

4. New Hampshire

New Hampshire does not have a state sales tax, but it does have a 9% meals and rentals tax on cooked meals in restaurants, short-term hotel rentals, and automobile rentals. A timber tax of 10% of the value of the wood is levied at the time of cutting, excluding cutting for personal use.

Because local governments cannot disclose sales taxes due to the statewide 0% sales tax, excise taxes are levied on tobacco and power transactions.

5. Oregon

Municipalities in Oregon levy taxes on specific commodities, such as cigarettes and prepared alcoholic drinks, despite the fact that the state has no sales tax. Some municipalities impose sales taxes, such as Ashland’s 5% tax on prepared meals.

In comparison to other states, Oregon has a high personal income tax, although it does not tax intangible assets such as stock accounts and bonds.

Which U.S. States Have No Sales Tax?

The five states with no sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon.

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What Is the Most Tax-Friendly State?

Various states offer preferential tax treatment, ranging from sales tax to income tax. Delaware, for example, has no sales tax and the seventh-lowest median property tax rate in the nation. Alaska, like Delaware, has no state sales tax, however Juneau has a 5% municipal sales tax. Furthermore, there is no income tax throughout the whole state. Meanwhile, Wyoming has a minimal sales tax, no property tax, and no income tax, making it one of America’s most tax-friendly states.

Which U.S. States Have the Highest Sales Tax?

California has the nation’s highest sales tax, at 7.25%. California is followed by Indiana, Mississippi, Rhode Island, and Tennessee, all of which have 7% sales tax rates.

Which States Have Minimal Sales Tax Rates?

The following 11 states have a sales tax ranging from 2% to 5%: Alabama (2%), Colorado (2.9%), Hawaii (4%), Louisiana (4%), Missouri (4.23%), New Mexico (4%), New York (4%), North Carolina (3%), Oklahoma (3.25%), South Dakota (4%), and Virginia (4.15%) are the states with the highest percentages.

Which States Have the Highest Combined State and Local Sales Tax?

Statewide sales taxes exist in 45 states, whereas local sales taxes exist in 38 states. Alabama (5.22%), Louisiana (5.07%), Colorado (4.75%), New York (4.52%), and Oklahoma (4.45%) have the highest combined state and municipal sales tax.

The Bottom Line

Because state tax rules are deregulated, each state is free to choose its own rate for its basic sales tax. States with high sales tax rates include New York and California, whereas Delaware, Montana, and New Hampshire have lower rates. Depending on where you reside and visit, the cost of paying (or not paying) sales tax will be included into your total budget.

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Because sales taxes fund services such as schools and infrastructure, living in a state with a low sales tax implies that money will come from other sources.

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