You've probably seen the headlines: "Move to Oregon and never pay sales tax again" or "Start your business in Delaware for tax-free bliss." And it's true that five states have no statewide sales tax. But here's what those headlines usually leave out: having no sales tax doesn't mean having no tax obligations, and it almost certainly doesn't mean you can avoid collecting sales tax from your customers in other states.
The five states without a statewide sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon, sometimes remembered by the acronym NOMAD. Each made this choice for different reasons, and each comes with trade-offs that rarely make the headlines. This guide walks through which states actually have no sales tax, why they chose that path, what to watch for, and whether registering your business there really helps your bottom line. For most multi-state sellers, the answer is more complicated than you'd hope.
The 5 States With No Statewide Sales Tax
Alaska is the only one of the five that allows local governments to impose their own sales taxes. There's no state-level tax, but you may still run into local sales taxes that can reach into the mid-to-high single digits depending on the municipality.
Delaware has no sales tax at any level, but it does have a gross receipts tax, a tax on a business's total revenue rather than its profit, currently ranging from about 0.0945% to 1.9914% depending on the business activity. It's not itemized on a receipt, but it often gets built into pricing.
Montana has no state or local sales tax, though certain resort communities are allowed to charge a local option tax on specific goods and services.
New Hampshire has no general sales tax, but it does tax prepared meals, room rentals, and vehicle rentals. If you're eating out or staying in a hotel, you're still paying something.
Oregon has no sales tax at the state or local level, one of the most straightforward setups on this list. The state relies heavily on income tax instead.
The common thread: each state found another way to fund government services. When sales tax revenue is missing, another tax fills the gap.
Why These States Chose to Skip Sales Tax
Oregon has rejected sales tax proposals at the ballot box multiple times since the 1930s. Oregonians have consistently voted it down as regressive, preferring income tax instead. It's become part of the state's identity.
New Hampshire built its brand around low taxes. Its state constitution prohibits a general income tax or sales tax, and it relies instead on property taxes, business taxes, and targeted taxes on things like meals and lodging.
Delaware took a different approach, using its lack of sales tax and business-friendly incorporation laws to attract corporations. More than 60% of Fortune 500 companies are incorporated there, and the gross receipts tax on businesses generates significant revenue without appearing on a customer's receipt.
Montana has a small, spread-out population that makes broad sales tax collection logistically difficult and relatively low-yield, so the state relies on income and property taxes instead, with targeted taxes in tourist areas.
Alaska benefits from oil revenue most states don't have. The Alaska Permanent Fund, funded by oil money, pays residents an annual dividend rather than taxing them, but the state also lets municipalities levy their own sales taxes, creating a patchwork system.
The takeaway: no sales tax doesn't mean no taxes. It just means the burden shows up somewhere else.
The Trade-Offs Worth Knowing
Higher income taxes. Oregon has one of the highest state income tax rates in the country, topping out near 9.9%. New Hampshire has no general income tax at all, including on interest and dividends, since that tax was fully repealed starting in 2025.
Property tax burden. New Hampshire consistently ranks among the highest states for property taxes, since there's no sales or income tax revenue to offset it.
Gross receipts tax. Delaware's gross receipts tax applies to total revenue, not profit, meaning a business pays even if it's operating at a loss. It's invisible to consumers but still affects pricing.
Local sales taxes in Alaska. Over 100 local jurisdictions in Alaska impose their own sales taxes, with rates that vary significantly by municipality. Some cities have none at all. This creates real compliance complexity if you're selling into multiple Alaska locations, since you need to know which specific localities tax you, at what rate, and whether your product is even taxable there. Always check current local rates before assuming, since they change and vary by city.
Resort and tourism taxes in Montana. Certain resort communities, like Big Sky or Whitefish, impose local option taxes on accommodations, restaurant meals, and other tourist-oriented purchases.
Alaska's Unique Situation
Alaska deserves its own callout because it's genuinely different from the other four. At the state level, Alaska collects no sales tax, but the state constitution gives local governments broad authority to levy their own, and many do. For businesses selling into Alaska, you can't just say "Alaska has no sales tax" and move on. You need to know which specific localities have one, what the rate is, and whether your nexus footprint even reaches their threshold.
The good news: the Alaska Remote Seller Sales Tax Commission offers a simplified path, letting remote sellers register once and remit local sales taxes through a single filing rather than dealing with each municipality separately.
Does Registering Your Business in a No-Tax State Actually Help?
This is the question we hear constantly: "If I incorporate in Delaware or set up in Oregon, can I avoid collecting sales tax?" The short answer is probably not.
Sales tax obligations are based on where your customers are, not where your business is incorporated or headquartered. That concept is nexus, and it's the foundation of sales tax compliance. If you incorporate in Delaware and run an ecommerce business there, you have no Delaware sales tax obligation, because Delaware doesn't have one. But the moment you sell to customers in Texas, California, New York, or any other state with a sales tax, you start creating nexus there. Once you cross that state's economic nexus threshold, you're required to register, collect, and remit, and your Delaware incorporation doesn't shield you from that.
There are legitimate reasons businesses still choose to incorporate in a no-tax state, including Delaware's business-friendly courts and flexible corporate law, or straightforward savings on purchases made for business use if you're actually located there. But if the goal is dodging sales tax collection across the country, incorporating somewhere tax-free won't get you there. Economic nexus applies based on where you're selling, not where you're based.
Economic Nexus Still Applies in These States
Even a state without its own sales tax can create compliance obligations for out-of-state sellers.
Alaska's local nexus rules. Many of Alaska's 100-plus local jurisdictions have adopted their own economic nexus rules. If you sell into a locality and cross its threshold, you may need to register and collect there, even with no state-level tax involved.
Use tax obligations. Even in no-sales-tax states, use tax can come into play for business purchases, since use tax is typically owed by the buyer when sales tax wasn't collected at the point of sale.
Nexus for other tax types. Selling into a no-sales-tax state can still create nexus for other taxes. Employees, inventory, or meaningful business activity in Oregon might trigger income tax nexus, and Delaware's gross receipts tax applies to any business with nexus there, sales tax or not.
Never assume a sales-tax-free state is a compliance-free state. The rules are different, but they still exist.
What This Means If You're Selling Into These States
Oregon. Nothing to collect, state or local. Just watch your physical presence, since an employee or stored inventory could trigger income tax obligations.
New Hampshire. No collection on standard retail goods, but prepared meals, room rentals, and vehicle rentals are taxable, so know how the state classifies what you sell.
Delaware. No sales tax collection on shipments there, but if your operations actually take place in the state, you may owe the gross receipts tax on your revenue.
Montana. Most transactions are untaxed, with the exception of goods or services sold into resort communities with a local option tax.
Alaska. Do your homework here. Identify the specific localities you sell into, check whether they levy a local tax, and monitor whether your volume crosses their nexus threshold. Businesses with meaningful Alaska sales should look at centralized registration through the Alaska Remote Seller Sales Tax Commission.
The Bigger Picture
These five states are a small fraction of your potential customer base. The other 45 have a sales tax, and that's where most of your compliance effort belongs. Understanding your nexus footprint across all 50 states, not just avoiding the five without a sales tax, is the real foundation of compliance.
For most businesses selling across state lines, the useful question isn't "where can I avoid sales tax." It's "where do I actually have obligations right now." Economic nexus thresholds are often lower than business owners expect, and getting it wrong doesn't just mean back taxes. It can mean penalties, compounding interest, and an audit that drains time and money you didn't budget for.
If you're spending energy researching Delaware incorporation or a move to Oregon, make sure you're not overlooking nexus thresholds you've already crossed elsewhere. Get clear on your current footprint first, then make informed decisions about registration and voluntary disclosure where needed. Schedule a free What's NexT call if you want a clear picture of where your business actually stands.
