Most states—38 in all—also allow local counties, cities, and municipalities to add their own separate sales and use taxes to the state rate, but there are a few consumer-friendly exceptions. Learn more about how state sales taxes work, and which states do and don’t impose them.
States With No State Sales Tax
Only five states don’t impose any sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Sales taxes are actually “sales and use” taxes. If a sales tax isn’t charged on a purchase, the buyer may be charged a use tax, which is a tax on the use, storage, or consumption of an item. Sales tax is remitted by the seller, while use tax is remitted by the buyer. Delaware doesn’t have a sales tax, but it does impose a gross receipts tax on businesses. Delaware’s gross receipts tax is a percentage of total receipts from goods sold and services rendered within the state, and it ranges from 0.0945% to 0.7468%. It’s not technically charged to consumers, but its effect nonetheless can be felt in the sales prices of goods and services.
States With Low Sales Tax Rates
Among states that do have a sales tax, some are less significant than others. Thirteen states impose sales tax rates of 5% of the purchase price or less, including five states where the tax is 4%:
Colorado: 2.9%Alabama: 4%Georgia: 4%Hawaii: 4%New York: 4%Wyoming: 4%Missouri: 4.225%Louisiana: 4.45%Oklahoma: 4.5%South Dakota: 4.5%North Carolina: 4.75%New Mexico: 5%North Dakota: 5%Wisconsin: 5%
New Mexico dropped its sales tax (in the form of a gross receipt tax) to 5% on Jan. 1, 2023, and as of July 1, 2023, the state’s gross receipt tax drops to 4.875%. The rest of the states impose a sales tax that ranges from 5.5% to California’s 7.25%.
Combined State and Local Taxes
Thirty-eight states collect sales tax at both the state and local levels. Connecticut, Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, Oregon, Rhode Island, and Washington, D.C. do not permit local sales taxes. The local sales tax rate in some states is pretty negligible, however. Idaho’s average is just 0.02%, and Mississippi’s average is 0.07%. And when all of New Jersey’s local taxes are averaged out, it actually works out to a negative number: -0.03%. Among states that do allow for a combined sales tax, Alabama, Arkansas, Louisiana, Tennessee, and Washington state have the highest rates when state and local taxes are added together. These combined rates range from 9.24% in Alabama to 9.55% in Louisiana and Tennessee. On the other end of the spectrum, Hawaii, Wisconsin, and Wyoming have the lowest combined rates: 4.44% in Hawaii, 5.22% in Wyoming, and 5.43% in Wisconsin.
Exemptions From State Sales Taxes
Many states have exemptions from specific tax items. Many states are sales-tax exempt for food, for example, but some keep food as a tax entity. Some states charge a lesser sales tax on food items, including:
Arkansas: 0.125%Missouri: 1.225%Tennessee: 4%Utah: 3%Virginia: 1%
All states except Illinois exempt prescription drugs from state and local sales taxes. Prescription drugs are subject to a 1% sales tax in Illinois. Illinois also had a 1% tax on food, but it suspended it through June 1, 2023. A handful of states also exempt non-prescription drugs from sales taxes, including:
FloridaMarylandMinnesotaNew JerseyNew YorkPennsylvaniaTexasVermontVirginiaWashington, D.C.
What State Sales Tax Means for You
Businesses, governments, and consumers adjust their tax rates when combined tax rates become prohibitive. For example, it’s not uncommon for New Jersey residents to cross the border into Delaware to shop—it’s often cheaper there, even with that gross receipts tax at play. In fact, New Jersey has taken steps to address this, exempting Salem County—which is located at the state line—from collecting the entirety of its 6.625% sales tax. New Jersey doesn’t waive the tax for Salem County residents entirely, however. It reduces it by half in an attempt to lure more consumers into doing their shopping at home.
