Finding states with the lowest sales tax in the US can significantly impact your purchasing power and overall cost of living. In 2025, understanding which states offer the most favorable sales tax rates is crucial for consumers, businesses, and those considering relocation. This comprehensive guide explores the complete landscape of sales tax rates across America, highlighting the states that offer the greatest savings on your everyday purchases.
Whether you’re a savvy shopper looking to maximize your dollar or a business owner considering where to establish operations, knowing which states have the lowest sales tax in America can lead to substantial financial benefits. From states with zero sales tax to those with minimal rates, this article provides all the essential information you need to make informed decisions.
Sales Tax in the US 2025
| Aspect | Details |
|---|---|
| Federal Sales Tax | None – No federal sales tax exists |
| State Authority | Each state sets its own sales tax policy |
| Rate Range | 0% to 7.25% at state level |
| Local Additions | Cities and counties can add additional taxes |
| Tax Base | Generally applies to tangible goods and some services |
| Collection Method | Collected at point of sale |
| Revenue Purpose | Funds state and local government operations |
Sales tax in the United States varies dramatically from state to state, with some states imposing no sales tax at all while others charge rates exceeding 10% when combined with local taxes. The sales tax system in America operates on both state and local levels, creating a complex patchwork of rates that can significantly impact consumer spending and business operations.
The federal government does not impose a national sales tax, leaving individual states to determine their own sales tax policies. This decentralized approach has resulted in five states maintaining zero state-level sales tax, while others have implemented various rate structures to generate revenue for public services and infrastructure.
Understanding the sales tax landscape is essential for making informed financial decisions, as these taxes directly affect the final price of goods and services you purchase daily.
Stats & Facts About Sales Tax in the US 2025
| Sales Tax Facts | Statistics |
|---|---|
| Average US Rate | 6.35% (combined state and local) |
| State Revenue Share | 23% of total state tax revenue |
| Collection Timeline | Most states require monthly remittance |
| Exempt Items | Food, prescription drugs (varies by state) |
| Online Sales Impact | $33+ billion additional revenue since Wayfair |
| Number of Tax Jurisdictions | Over 12,000 nationwide |
| Economic Impact | Influences consumer behavior and business location |
Sales tax generates approximately 23% of total state tax revenue nationwide, making it the second-largest source of state income after income taxes. The importance of sales tax revenue has grown significantly over the past decades, as states increasingly rely on consumption-based taxation to fund essential services.
The average combined state and local sales tax rate across the United States is approximately 6.35% in 2025. However, this average masks significant variations, with some areas experiencing rates as low as 0% and others reaching over 11% when all local taxes are included.
E-commerce has fundamentally changed sales tax collection, with the 2018 Supreme Court decision in South Dakota v. Wayfair allowing states to require online retailers to collect sales tax regardless of physical presence. This ruling has increased state revenue and leveled the playing field between online and brick-and-mortar retailers.
US States with Zero Sales Tax in 2025
| State | State Sales Tax | Local Sales Tax Allowed | Key Benefits |
|---|---|---|---|
| Alaska | 0% | Yes (1%-7.5% in some areas) | No state tax, energy revenue offsets |
| Delaware | 0% | No | Complete sales tax freedom |
| Montana | 0% | Limited (resort areas only) | No general sales tax statewide |
| New Hampshire | 0% | No | No sales or income tax burden |
| Oregon | 0% | No | Strong income tax compensates |
Five states maintain no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. These states, often referred to as the “NOMAD states” (New Hampshire, Oregon, Montana, Alaska, Delaware), offer significant advantages for consumers and businesses seeking to minimize tax burdens.
Alaska stands out as the only zero sales tax state that allows local municipalities to impose their own sales taxes. This means that while there’s no state sales tax, certain Alaskan cities and boroughs may still charge local sales taxes, typically ranging from 1% to 7.5% in tourist-heavy areas.
Delaware, Montana, New Hampshire, and Oregon maintain complete prohibitions on both state and local sales taxes, making them true tax havens for retail purchases. These states have developed alternative revenue streams to compensate for the lack of sales tax income.
States with the Lowest Sales Tax 2025
| State | State Sales Tax Rate | Average Combined Rate | Local Tax Potential |
|---|---|---|---|
| Colorado | 2.9% | 7.72% | High local variation |
| Alabama | 4.0% | 9.24% | Significant local taxes |
| Georgia | 4.0% | 7.31% | Moderate local additions |
| Hawaii | 4.0% | 4.44% | Minimal local variation |
| New York | 4.0% | 8.52% | High in NYC area |
| Wyoming | 4.0% | 5.44% | Limited local taxes |
Colorado leads the nation with the lowest non-zero state sales tax rate at just 2.9% in 2025. This makes Colorado an attractive destination for major purchases while still maintaining some sales tax revenue for state operations.
Five states follow Colorado with 4.0% state sales tax rates: Alabama, Georgia, Hawaii, New York, and Wyoming. These states offer relatively low base rates, though local taxes can significantly increase the total tax burden in some areas.
The low sales tax rates in these states often reflect different approaches to taxation, with some relying more heavily on income taxes, property taxes, or natural resource revenues. Understanding these tax structures helps explain why certain states can maintain lower sales tax rates.
Combined State and Local Sales Tax Rankings 2025
| Rank | State | Average Combined Rate | State Rate | Typical Local Range |
|---|---|---|---|---|
| 1 | Alaska | 1.82% | 0% | 0%-7.5% |
| 2 | Hawaii | 4.50% | 4.0% | 0%-0.5% |
| 3 | Wyoming | 5.44% | 4.0% | 0%-3% |
| 4 | Maine | 5.50% | 5.5% | 0%-3% |
| 5 | Wisconsin | 5.70% | 5.0% | 0%-1.75% |
| 6 | Nevada | 6.85% | 4.6% | 0.75%-3.65% |
| 7 | Utah | 7.19% | 4.85% | 0%-4.2% |
When considering both state and local taxes combined, Alaska maintains the lowest average rate at 1.82% despite allowing local sales taxes. This low combined rate results from the majority of Alaska having no sales tax at all, with only certain municipalities imposing local taxes.
Hawaii follows with a 4.50% average combined rate, benefiting from minimal local tax additions to its 4% state rate. The state’s island geography and centralized tax structure contribute to this consistency across the state.
Wyoming rounds out the top three lowest combined rates at 5.44%, demonstrating how a moderate state rate combined with limited local taxes can result in favorable overall tax burden. This makes Wyoming particularly attractive for both residents and businesses.
Low Sales Tax States by Region 2025
| Region | States with Low Sales Tax | Average Regional Rate | Key Characteristics |
|---|---|---|---|
| West | AK, OR, MT, WY, CO, HI, NV | 4.2% | Resource-rich economies |
| Northeast | NH, DE, ME | 3.7% | Mixed economic approaches |
| South | AL, GA | 6.5% | Traditional southern tax structures |
| Midwest | WI | 5.7% | Manufacturing-based economies |
The Western United States dominates the list of lowest sales tax states, with seven of the ten lowest rates found in western states. This regional pattern reflects the historical development of these states and their diverse revenue sources, including natural resources and tourism.
Mountain states particularly benefit from natural resource extraction revenues, allowing them to maintain lower sales tax rates. States like Wyoming, Montana, and Alaska generate significant income from oil, gas, and mineral extraction, reducing their reliance on sales tax revenue.
Northeastern states show more variation, with New Hampshire maintaining zero sales tax while neighboring states like Vermont and Maine have moderate rates. This variation often reflects different state priorities and economic structures within the same geographic region.
Economic Impact of Low Sales Tax States 2025
| Economic Factor | Impact on Low Sales Tax States | Measurable Benefits |
|---|---|---|
| Consumer Spending | 3-8% increase in retail activity | Higher per capita purchases |
| Border Shopping | 15-25% of retail from out-of-state | Increased business revenue |
| Business Location | 40% factor in retail site selection | Job creation and investment |
| Tourism Revenue | Enhanced shopping destination appeal | Extended visitor stays |
| Economic Development | Attracts distribution centers | Supply chain advantages |
States with low or no sales tax often experience increased retail activity and consumer spending, as residents have more disposable income. This economic boost can offset some of the lost tax revenue through increased economic activity and job creation in retail and service sectors.
Border commerce significantly benefits low sales tax states, as residents from high-tax neighboring states frequently cross borders for major purchases. This phenomenon, known as “tax shopping,” can provide substantial economic benefits to low-tax jurisdictions while creating revenue challenges for higher-tax states.
Businesses often consider sales tax rates when making location decisions, particularly for retail operations and distribution centers. The absence or reduction of sales tax can be a significant competitive advantage in attracting businesses and the associated jobs and economic activity.
How States Compensate for Low Sales Tax Revenue 2025
| State | Primary Revenue Alternatives | Unique Revenue Sources |
|---|---|---|
| Alaska | Oil revenues, federal transfers | Permanent Fund dividends |
| Delaware | Corporate taxes, banking fees | Business-friendly incorporation |
| Montana | Income tax, natural resources | Mining and energy extraction |
| New Hampshire | Property tax, business taxes | State liquor monopoly |
| Oregon | Income tax (highest rates) | Forest product revenues |
| Colorado | Income tax, marijuana taxes | Cannabis legalization revenue |
States with low or no sales tax must generate revenue through alternative means, typically relying more heavily on income taxes, property taxes, or natural resource revenues. This diversified approach to taxation can create more stable revenue streams but may shift the tax burden to different segments of the population.
Alaska’s unique situation involves significant oil revenue sharing through the Alaska Permanent Fund, which distributes annual dividends to residents. This oil wealth allows Alaska to maintain both no state sales tax and no state income tax, making it one of the most tax-friendly states for individuals.
New Hampshire compensates for zero sales tax through higher property taxes and business taxes, along with revenues from state-controlled liquor sales. This approach places more tax burden on property owners and businesses while keeping consumer purchases tax-free.
Shopping Strategies for Low Sales Tax States 2025
| Shopping Strategy | Potential Savings | Best Purchase Categories |
|---|---|---|
| Cross-border shopping | 5-11% on major purchases | Electronics, appliances, vehicles |
| Tax-free weekends | 4-10% during events | Back-to-school items, clothing |
| Business purchases | Full sales tax savings | Equipment, supplies, inventory |
| Online opportunities | Variable savings | Specialty items from small retailers |
| Bulk purchasing | Maximized savings | Non-perishable goods |
Timing major purchases to coincide with trips to low sales tax states can result in significant savings, particularly for expensive items like electronics, appliances, and vehicles. The savings on a single large purchase can often justify the travel costs to a neighboring low-tax state.
Online shopping from retailers based in zero sales tax states may provide savings, though most major retailers now collect sales tax for the buyer’s home state. However, smaller retailers may still offer opportunities for tax savings on certain purchases.
Understanding which items are exempt from sales tax in various states can maximize savings opportunities. Many states exempt necessities like groceries and prescription medications, while others have broader exemptions that can benefit consumers.
Business Considerations for Low Sales Tax States 2025
| Business Factor | Low Sales Tax Advantage | Strategic Considerations |
|---|---|---|
| Operational Complexity | Simplified tax compliance | Reduced accounting burden |
| Competitive Pricing | Better price positioning | Market advantage opportunities |
| Customer Attraction | Lower total costs | Increased customer base |
| Distribution Strategy | Cost-effective shipping | Regional market coverage |
| Service Business Benefits | Potential tax exemptions | Industry-specific advantages |
Companies establishing retail operations or distribution centers often prioritize states with favorable sales tax environments. The absence of sales tax can simplify operations, reduce compliance costs, and provide competitive pricing advantages over businesses in higher-tax states.
E-commerce businesses may benefit from establishing nexus in low sales tax states, though modern tax laws require collection based on buyer location rather than seller location. However, operational benefits and cost savings may still make low-tax states attractive for business establishment.
Service-based businesses can particularly benefit from low sales tax states, as many services are subject to sales tax in some jurisdictions but not others. Understanding these variations can inform business location and pricing strategies.
Future Trends in Sales Tax Policy
| Trend | Impact on Low Sales Tax States | Timeline |
|---|---|---|
| Digital taxation expansion | May reduce competitive advantage | 2025-2027 |
| Remote work policies | Could affect state tax revenue | Ongoing |
| Environmental taxes | Selective increases possible | 2025-2030 |
| Federal intervention | Potential standardization pressure | Long-term |
| Economic pressures | May force rate increases | Variable |
Digital goods and services taxation continues to evolve, with states increasingly applying sales tax to previously untaxed digital transactions. This trend may affect the competitive advantage of low sales tax states as the digital economy grows.
Remote work trends have prompted discussions about tax policy changes, potentially affecting how states approach sales tax in relation to where people live and work. These changes could influence the attractiveness of low sales tax states for remote workers.
Environmental and social impact considerations are influencing tax policy, with some states implementing specific taxes on certain goods while maintaining low general sales tax rates. This targeted approach may reshape the landscape of sales tax advantages.
Planning Your Tax Strategy Around Low Sales Tax States
| Planning Element | Key Considerations | Action Items |
|---|---|---|
| Personal Finance | Total tax burden assessment | Calculate savings potential |
| Business Strategy | Multi-state operations planning | Evaluate location benefits |
| Investment Decisions | Long-term tax implications | Consider future changes |
| Retirement Planning | Fixed income tax efficiency | Prioritize low-tax states |
| Major Purchases | Timing and location optimization | Plan shopping strategies |
Developing a comprehensive tax strategy that incorporates sales tax considerations can result in substantial savings over time. This involves understanding not just current rates but also trends and changes that may affect future tax burdens.
For individuals considering relocation, sales tax rates should be evaluated alongside income taxes, property taxes, and overall cost of living. The total tax picture often matters more than any single tax component when making major life decisions.
Businesses should regularly review their tax strategies in light of changing sales tax laws and competitive landscapes. What works today may not provide the same advantages in the future as tax laws and business practices evolve.
Disclaimer: The data research report we present here is based on information found from various sources. We are not liable for any financial loss, errors, or damages of any kind that may result from the use of the information herein. We acknowledge that though we try to report accurately, we cannot verify the absolute facts of everything that has been represented.
