5 states with no sales tax (and what that means for your business)

Published 25 November 2025

Table of contents

• Which states have no sales tax?
• Doing business in the US states with no sales tax
• Benefits of doing business in states with no sales tax
• Mistakes to avoid when operating in states with no sales tax
• Stay on top of sales tax with Xero
• FAQs on US states with no sales tax

Key takeaways

• There's no state sales tax in Alaska, Delaware, New Hampshire, Montana, or Oregon.
• Some local governments in Alaska collect sales tax, and Montana has sales tax on lodging.
• All these states have other business taxes.
• Although there can be benefits to doing business in no-sales-tax states, you need to know the other tax requirements.

Which states have no sales tax?

Delaware and Oregon have no sales tax on any level – they are sales-tax-free states. Alaska, Montana, and New Hampshire are on most lists of states with no sales taxes, but it's a little more complicated in these states.

• Alaska has no state sales tax, but about 100 municipalities impose local sales taxes.
• Montana doesn't have a general state or local sales tax, but there's an 8% sales and use lodging tax that applies to hotel rooms, short-term rentals, and similar arrangements.
• New Hampshire has an 8.5% meals and rooms tax, which applies to hotel rooms, short-term rentals, and prepared food and drinks.

Doing business in the US states with no sales tax

States with no sales tax generally have other business taxes to make up for the lack of a state sales tax. If you're operating in any of these states, you need to be aware of your other tax obligations.

Alaska business taxes

Alaska has a corporate income tax that ranges from 0 to 9.4% of profits – all businesses registered as corporations must deal with this tax. The state does not have income tax, meaning that your business doesn't have to withhold state income taxes for employees.

However, Alaska is the only one of the 5 states with no sales tax to have sales tax on the local level. If you’re doing business in this state or sending goods to customers in this state, you must be aware of the local rates. Note that some areas have seasonal sales tax rates that get higher in the tourist season.

Delaware business taxes

Delaware levies a gross receipts tax that applies to your revenue with no deductions for costs of goods sold or other business expenses. As of 2025, the rate ranges from 0.0945% to 0.7468%. For instance, if your rate is 0.7468% and your gross receipts are $1 million, your tax due is $7468.

There's also a corporate income tax of 8.7% – if you register a corporation in Delaware, you must pay this tax on federal taxable income you earned there. But you don't have to pay this tax if you incorporate in Delaware and don't do any business in the state.

Corporations, limited liability companies (LLCs), and partnerships must pay franchise tax in Delaware.

• For corporations, the tax ranges from $175 to $250,000, depending on several factors, such as whether the business is considered a large corporate filer.
• For LLCs and partnerships, it's typically a flat tax of $300 per year.

Delaware has an individual income tax, meaning that companies with employees based in this state must withhold state income taxes and file returns with the Division of Revenue.

Business taxes in Montana

All Montana corporations must file a Montana Corporate Income Tax return and pay a tax of 6.75% of their profits. You are eligible for an alternative rate if you meet three criteria:

• you only have sales activity in Montana
• your gross sales in Montana are $100,000 or less
• you don't own or rent real estate in the state.

The alternative rate is 0.5% of your gross sales.

If you rent out rooms, you must collect an 8% lodging and facilities sales and use tax. The tax applies to accommodations only, not to dining or other services. It doesn't apply if the same person rents a room for 30 or more consecutive days.

Montana has an individual income tax – so if you have employees in the state, you need to withhold tax and file state payroll returns.

Business taxes in New Hampshire

Although there's no state sales tax, there are three other taxes your business may have to pay.

Meals and Rooms (Rentals) tax

If you run a restaurant, a hotel, or any other business that rents rooms and/or sells prepared food and drinks, you need to collect this tax and remit it to the state.

Business Profits Tax

All New Hampshire businesses (sole props, partnerships, corporations, and so on) face a New Hampshire Business Profits Tax of 7.5%. You only need to pay if your gross business income is $109,000 or more, as of 2025.

Business Enterprise Tax

As of 2025, all businesses with gross receipts over $298,000 or an enterprise tax base over that amount must pay the Business Enterprise Tax. The rate is 0.55% of the enterprise tax base, which includes:

• All paid or accrued compensation
• Interest paid or accrued
• Dividends paid by the business

For example, if you paid $300,000 in compensation, $50,000 in interest, and $100,000 in dividends, your enterprise tax base is $450,000, making the tax $450,000 x 0.0055 (0.55%) = $2475.

Oregon business taxes

Corporations doing business in Oregon must file a corporate excise return and pay tax at the following rates:

• 6.6% on Oregon taxable income of $1 million or less
• 7.6% on Oregon's taxable income over $1 million

Corporations not doing business in Oregon but with income from Oregon must also file and pay corporate income tax.

Businesses with employees must file and pay Oregon withholding tax on top of their federal payroll tax returns.

Benefits of doing business in states with no sales tax

Operating in states with no sales tax can bring you a few benefits, compared with doing business in states with sales tax.

• Fewer tax responsibilities: even if you have to file state corporate or franchise returns, you don't have to worry about the sales tax return.
• No penalties for late payments: most states charge about 10% if you pay late, making a small error into a big expense, but you don't have to deal with that if you're in a state with no sales tax.
• No risk of mixing sales tax into the general fund: although businesses don't pay sales tax, they must collect it from customers and send it to the government. It's easy for this money to get mixed into the general fund and used for other purposes, which can lead to penalties and loss of business licenses.

Want to ensure compliance in all the states you do business? The Federation of Tax Administrators has links to the tax forms in all 50 states.

Mistakes to avoid when operating in states with no sales tax

Want to set up shop in a state with no sales tax? Then keep these tips in mind:

• Look into other business tax obligations – make sure you understand all the state's tax requirements for businesses.
• Check nexus requirements if selling to customers out of state – you may need to collect sales tax from your out-of-state customers if you have nexus in their states.
• Use software to stay on top of the numbers – accounting software can help you track sales tax rates in the areas you ship products to. It can also help you calculate payments, file returns, and deal with the sales tax compliance details.

To learn more, check out the Tax Foundation's resources on sales tax and its list of sales tax rates.

Stay on top of sales tax with Xero

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FAQs on US states with no sales tax

Have more questions? Here are some answers to some of the big questions people have about states with no sales tax.

What are NOMAD states?

NOMAD refers to the 5 states with no sales tax: New Hampshire, Oregon, Montana, Alaska, and Delaware.

Which states have the lowest sales tax rates?

Aside from the 5 states with no sales tax, the state with the lowest rate is Colorado at 2.9%. But most counties and municipalities also add their own sales taxes in this state. Statewide rates range from 2.9% to 11.2%, with an average of just under 8%.

Which states have the highest sales tax rates?

California has the highest state sales tax at 7.25%. Indiana, Mississippi, Rhode Island, and Tennessee tie for second with a state-level rate of 7%. All these states may add local sales taxes to the state sales tax.

Do I have to collect sales tax in other states if I’m based in a NOMAD state?

Possibly. If you sell to customers in other states, you may need to collect sales tax based on their local rate and send a sales tax return. Most states only require you to collect sales tax if you have economic nexus (usually, a physical presence in the state or having sales over a certain threshold ($100,000+ in most states).

What if I buy business supplies or equipment in a NOMAD state?

You may need to report those purchases on your state's sales tax return and pay use tax at your local rate. If you don't file sales tax returns for your business, you may be required to file a stand-alone use tax return. Check with the Department of Revenue in your state to learn more.

Are there states with no income tax and no sales tax?

Yes – Alaska and New Hampshire have no state income tax or sales tax. The other states with no income tax are Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming, while the other no sales tax states are Oregon, Montana, and Delaware.