State with 0 Sales Tax: A Complete Guide for Businesses and Shoppers

Have you ever wondered why your neighbor pays nothing more at checkout while you pay an extra percentage on every purchase? It probably comes down to sales tax policy. For residents or businesses located in a state with 0 sales tax, the difference can mean thousands of dollars in savings every year. For business owners, it can be the deciding factor over other business location options. This guide will go over which states are zero sales tax states, what types of businesses get the most savings, and what the trade-offs are.

What Does “State with 0 Sales Tax” Really Mean?

A state with 0 sales tax means that the state does not have a general sales tax applied to the purchase of certain goods and services. A buyer can purchase an item, a pair of shoes, a piece of furniture, or a bag of groceries without a sales tax or percentage added to the price at the state level.

A state having no sales tax means the state government does not collect sales tax. However, this does not always mean that sales taxes do not exist. Some local municipalities in that state may charge their own sales tax.

This is often compensated for by increased property taxes, income taxes, or taxes from natural resources like oil.

States in the U.S. That has 0 Sales Tax

These five states are unique as they are the only states with 0 sales tax in the country and provide a distinct economic experience compared to the other 45 states.

How a 0 Sales Tax State Benefits Residents and Businesses

The benefits of living or doing business in a state with 0 sales tax go beyond the few cents saved from not having to pay sales tax.

For Residents:

• Lower cost of living affects all daily purchases
• Higher purchasing power for big-ticket items such as electronics, appliances, and vehicles
• Easier budgeting, as the sticker price is the final price with no hidden taxes
• Easier for retirees on fixed and lower incomes

For Businesses:

• Less administrative work, as no sales tax has to be collected, tracked, or submitted
• Pricing stays more competitive compared to businesses in high-tax states
• Easier and less expensive to set up accounting and compliance
• Less expensive to operate for small and mid-sized retailers

Purchasing a new car that costs $40,000 in a state with a 7% sales tax would cost $2,800 more. In a state with 0 sales tax, that $2,800 is yours to keep.

Comparing States With and Without Sales Tax

To truly appreciate the impacts, consider this side-by-side breakdown:

The cumulative savings over 10 years in a state with 0 sales tax are especially beneficial for families, retirees, and retailers with high sales volume.

Business Considerations in a 0 Sales Tax State

For businesses and startups, basing operations in a state with 0 sales tax has many benefits. Here are a few key considerations:

• Delaware, although it has a gross receipts tax counted in place of sales tax, still remains the best option to incorporate because of the flexibility with its corporate laws, privacy protections, and its specialized Court of Chancery.
• Wyoming and Nevada do not have income tax, but they are sometimes confused with states that have 0 sales tax. Use the correct data to make the correct determination before making any decisions.
• Alaska has no state sales tax, but allows individual boroughs to impose their own sales tax. This means that operating in Juneau may involve sales tax that you wouldn’t encounter operating in rural Alaska.
• Oregon has very strict laws about where income can be sourced, which is especially important for businesses operating across several states.

Do your best to consult with a tax attorney or CPA who knows the specifics of the state with 0 sales tax you are considering for incorporation or relocation before taking any of the aforementioned actions.

The Impact on Online Shopping and eCommerce

Increased complexity for e-commerce has come from the newest state with 0 sales tax rules. For example, the 2018 South Dakota v. Wayfair Supreme Court case allowed online retailers to collect sales tax from buyers in states where the sellers have an economic presence, without considering the physical location of the seller.

What this means for eCommerce:

• If you own an eCommerce business in either Oregon or Montana, you could be liable for collecting sales tax in other states where you have significant sales
• If a buyer’s home state has an out-of-state seller in a 0 sales tax state, the buyer may have to pay a “use tax” to their home state
• Sales tax collection is now done automatically by marketplace facilitators like Amazon and Etsy in a majority of states

Although there are challenges, operating an e-commerce business in a state with 0 sales tax still results in fewer home-state compliance hurdles and meaningful internal cost advantages.

Are There Drawbacks to Living or Operating in a 0 Sales Tax State?

There are trade-offs to every tax policy, and these are the ones you should pay close attention to:

• Higher income or property taxes often compensate for the absence of sales tax revenue, and Alaska can still charge local taxes
• Limited public services may exist in some cases, depending on the total revenue of the state
• The cost of living in New Hampshire, Oregon, and parts of Alaska can be higher for reasons unrelated to sales tax
• Business logistics can be affected in Montana and Alaska due to remote location challenges

A state with 0 sales tax is not automatically the cheapest place to live or operate; always look carefully at taxes in other areas before making a final decision. Even in a state with 0 sales tax, businesses must still comply with IRS federal tax reporting requirements, including filing income, payroll, and self-employment taxes

Frequently Asked Questions About States with 0 Sales Tax

What state has zero sales tax and zero income tax?

The only state that has neither a state sales tax nor a state income tax is Alaska. However, local sales taxes may still apply.

Is it illegal to shop in a zero sales tax state to avoid taxes?

No, you can shop in any state in the U.S. However, if you bring items that exceed a certain amount back to your home state, you may be liable to pay a “use tax” on those items.

Does Delaware’s 0 sales tax apply to all purchases?

While Delaware has no general sales tax, there is a gross receipts tax on businesses that can apply an indirect cost to consumers.

If an online business is located in Oregon, can it avoid collecting sales tax entirely?

Not exactly. Economic nexus rules state that if you have a sales threshold of $100,000 or 200 transactions in another state, you may still owe sales tax in that state.

How to Choose the Best State for Your Business or Residence

There are a multitude of factors to consider when choosing the right state with 0 sales tax for your needs:

• Total tax burden compare income, property, corporate, and sales taxes side by side
• Business infrastructure considers available talent, transportation, and market access
• Industry regulations in some states create a more favorable business climate for specific industries
• Cost of living, housing, utility prices, and healthcare vary widely between states
• The quality of life, available education, climate, and recreational activities can impact employee retention

Tools such as the Tax Foundation’s State Business Tax Climate Index can help you analyze states more effectively than focusing on the sales tax rate alone.

Conclusion: Making the Most of a State with 0 Sales Tax

For people looking for a smart way to manage taxes, whether for everyday shopping, starting a new business, or making a long-term investment, the states with 0 sales tax can open up new ways of thinking about financial strategy. Oregon, Montana, New Hampshire, Delaware, and Alaska each offer their own unique blend of tax advantages and lifestyle factors.

Making financial decisions based on a single tax is never the best approach. Get a full picture of the trade-offs and seek a qualified financial planner’s insight to pick a place that works for both your financial and personal goals. When approached thoughtfully, living or operating in a state with 0 sales tax can be one of the smartest and most perfectly legal financial moves you make in 2026.