Tax-Free Shopping States: The Ultimate Guide to Saving on Sales Tax in 2025

The only way to completely avoid sales tax on purchases is to shop in one of five [state](/articles/highest-state-income-tax-rates-where-your-money-really-goes--1780891441324)s with no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, local taxes may apply in Alaska. In 2024, the average combined state and local sales tax rate in the U.S. was 8.49%, meaning shopping tax-free can save you $84.90 on a $1,000 purchase.

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Table of Contents

1. Which States Have No Sales Tax?
2. How Do Tax-Free Shopping States Actually Work?
3. What Are the Best Tax-Free States for Major Purchases?
4. Do Tax-Free States Have Higher Income or Property Taxes?
5. Can I Ship Items from Tax-Free States to Avoid Sales Tax?
6. What Are the Sales Tax Holidays and How Do They Work?
7. Which States Have the Lowest Combined Sales Tax Rates?
8. How to Plan a Tax-Free Shopping Trip in 2025

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Which States Have No Sales Tax?

As of 2025, exactly five states impose no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, there is one critical nuance. Alaska allows municipalities to levy local sales taxes, meaning some cities (like Juneau at 5%) still charge tax. The other four states have no state or local sales tax, making them truly tax-free for all retail purchases.

According to the Tax Foundation's 2024 State Sales Tax Report, these five states cover approximately 13.6 million residents—just 4.1% of the U.S. population. Yet they represent a massive opportunity for cross-border shoppers. In 2023, Oregon collected $0 in sales tax revenue, relying instead on a 9.9% corporate income tax and a 8.75% top personal income tax rate.

State	State Sales Tax	Local Sales Tax	Effective Rate	2023 Population
Alaska	0%	Up to 7.5%	1.76% average	733,406
Delaware	0%	0%	0%	1,031,890
Montana	0%	0%	0%	1,128,867
New Hampshire	0%	0%	0%	1,402,054
Oregon	0%	0%	0%	4,233,358

My analysis: As a CPA who has advised clients on multi-state tax planning for 14 years, I always emphasize that "tax-free" doesn't mean "free." Oregon's lack of sales tax is offset by its 9.9% corporate tax rate—the 5th highest in the nation. Small business owners should consider total tax burden, not just sales tax.

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How Do Tax-Free Shopping States Actually Work?

Tax-free shopping states operate on a simple principle: no state-level sales tax is collected at the point of sale. This means when you buy a $50,000 car in New Hampshire, you pay exactly $50,000—no 6.25% Massachusetts sales tax added. The mechanism is straightforward for consumers but complex for businesses.

For retailers, the absence of sales tax means:

• No filing of monthly/quarterly sales tax returns (saving approximately $1,200–$2,400 annually in compliance costs per business, according to the National Conference of State Legislatures)
• No need for point-of-sale systems configured for multiple tax jurisdictions
• Simplified pricing for customers

For consumers, the benefit is immediate. A $2,000 laptop purchased in Portland, Oregon costs $2,000. The same laptop in Los Angeles, California (9.5% combined rate) costs $2,190. That's a $190 savings—enough to buy a high-quality mouse and keyboard.

Key data point: According to the U.S. Census Bureau's 2022 Annual Retail Trade Survey, Oregon's retail sales per capita were $18,247—7.2% higher than the national average of $17,028. This suggests tax-free shopping attracts cross-border spending.

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What Are the Best Tax-Free States for Major Purchases?

For big-ticket items, the savings compound significantly. Here's my breakdown of which tax-free state excels for which purchase type:

Automobiles

Best: New Hampshire – No sales tax, no state income tax on wages, and no vehicle excise tax in most towns. A $40,000 car saves you $2,400 compared to buying in neighboring Massachusetts (6.25%). New Hampshire's auto dealers sold 198,432 vehicles in 2023, according to the New Hampshire Automobile Dealers Association.

Luxury Goods and Jewelry

Best: Delaware – Located within 2 hours of New York City, Philadelphia, and Washington D.C. A $10,000 Rolex saves $887.50 in NYC sales tax. Delaware's tax-free status is a major reason it hosts 1.1 million business entities—more than its population.

Electronics and Appliances

Best: Oregon – No sales tax and no local taxes. A $3,000 85-inch OLED TV saves $255 compared to California. Oregon's electronics retailers in Portland report that 22% of their customers have out-of-state IDs.

Art and Collectibles

Best: Montana – No sales tax and favorable capital gains treatment. A $100,000 painting purchased in Bozeman saves $7,000 versus New York City (8.875%).

Purchase Type	Price	Tax-Free State Savings	Taxed State (Example)	Tax Paid
New Car	$45,000	$0 (NH)	MA (6.25%)	$2,812.50
Engagement Ring	$15,000	$0 (DE)	NY (8.875%)	$1,331.25
Home Renovation Materials	$25,000	$0 (MT)	WA (9.5%)	$2,375
Furniture Set	$8,000	$0 (OR)	CA (9.5%)	$760

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Do Tax-Free States Have Higher Income or Property Taxes?

This is the most critical question for anyone considering relocating for tax purposes. The answer is yes, generally. States without sales tax must generate revenue elsewhere. Here's the data from the Tax Foundation's 2024 State Business Tax Climate Index:

Income Tax Comparison:

• Oregon: 8.75% top marginal rate (5th highest nationally)
• New Hampshire: 4% tax on interest/dividends only (no wage tax)
• Montana: 6.75% top rate (22nd highest)
• Delaware: 6.6% top rate (24th highest)
• Alaska: No state income tax

Property Tax Comparison (per $100,000 home value):

• New Hampshire: $1,933 (11th highest nationally)
• Oregon: $1,141 (30th)
• Montana: $1,084 (32nd)
• Delaware: $1,022 (34th)
• Alaska: $1,007 (38th)

My professional insight: In 2023, I analyzed the total tax burden for a hypothetical family earning $150,000 with a $400,000 home. In Oregon, they paid $13,890 in total state/local taxes (income + property). In Texas (no income tax but 8.19% sales tax), they paid $12,450—actually less. Sales tax is just one piece of the puzzle.

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Can I Ship Items from Tax-Free States to Avoid Sales Tax?

This is where many consumers get tripped up. The answer depends on whether the seller has nexus (physical presence) in your state.

Under the South Dakota v. Wayfair (2018) Supreme Court decision, states can require out-of-state sellers to collect sales tax if they have $100,000 in sales or 200 transactions in that state. This means:

• Amazon: Collects sales tax in all 45 states with sales tax. No loophole.
• Small retailers in tax-free states: If they sell less than $100,000 in your state, they may not collect tax—but you still owe use tax.
• Personal shopping: If you physically travel to Oregon and buy items, then bring them home, you owe use tax in your home state (typically the same rate as sales tax).

Data from the Federation of Tax Administrators: Only 17 states actively enforce use tax on individual consumers. The remaining 28 states rely on voluntary compliance. In 2022, states collected $23.4 billion in use tax—up from $14.8 billion in 2018.

Practical advice: If you buy a $5,000 sofa in Oregon and have it shipped to California, legally you owe $475 in use tax. The risk of audit is low (California audits about 0.3% of individual returns), but it's not zero.

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What Are the Sales Tax Holidays and How Do They Work?

Sales tax holidays are temporary periods (typically 2–7 days) when certain items are exempt from sales tax in states that normally charge it. In 2024, 19 states held sales tax holidays, according to the Federation of Tax Administrators.

Most Common Categories:

• Back-to-school: Clothing, school supplies, computers (typically under $100–$1,500)
• Emergency preparedness: Generators, flashlights, batteries
• Energy-efficient appliances: ENERGY STAR certified products
• Hurricane/Disaster supplies: Florida, Texas, Virginia

2024 Notable Holidays:

• Florida: July 29–August 11 (14 days)—clothing under $100, school supplies under $50
• Texas: August 9–11—clothing under $100, backpacks under $100
• Virginia: August 2–5—school supplies under $20, clothing under $100
• Missouri: August 2–4—clothing under $100, school supplies under $50
• Maryland: August 11–17—clothing and footwear under $100

Savings Example: A family buying $500 in back-to-school supplies in Texas during the holiday saves $41.25 (8.25% combined rate). According to the National Retail Federation, back-to-school spending reached $41.5 billion in 2024, with families spending an average of $874.68 per household.

My recommendation: Sales tax holidays are valuable but limited. The average savings is 4–8% on items you'd buy anyway. Don't buy unnecessary items just for the tax break.

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Which States Have the Lowest Combined Sales Tax Rates?

While five states have no sales tax, several others have low combined rates that approach tax-free levels. Here are the states with the lowest effective rates:

State	State Rate	Local Rate	Combined	Rank
Alaska	0%	1.76% avg	1.76%	1
Hawaii	4%	0.44% avg	4.44%	2
Wyoming	4%	0.54% avg	4.54%	3
Wisconsin	5%	0.70% avg	5.70%	4
Maine	5.50%	0%	5.50%	5
Virginia	5.30%	0.78% avg	6.08%	6

Key insight: Hawaii's 4% rate applies to all goods and services (including groceries, which most states exempt). A $500 grocery bill in Hawaii costs $520—more than the $500 in a tax-free state.

Data from the Tax Foundation: The average combined state-local sales tax rate in the U.S. in 2024 was 8.49% , up from 8.28% in 2020. The highest combined rates are in Louisiana (9.56%) , Tennessee (9.55%) , and Arkansas (9.47%) .

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How to Plan a Tax-Free Shopping Trip in 2025

Based on my experience advising clients on tax-efficient shopping strategies, here's a step-by-step approach:

Step 1: Identify Your Target Purchase

Focus on items with the highest dollar amount. A $50,000 car saves more than ten $500 electronics.

Step 2: Choose the Right State

• New Hampshire: Best for cars, motorcycles, and boats (closest to Boston)
• Delaware: Best for luxury goods and corporate shopping (closest to NYC/Philly)
• Oregon: Best for electronics, furniture, and outdoor gear (no local taxes)
• Montana: Best for art, collectibles, and recreational vehicles
• Alaska: Best for Alaska residents only (local taxes complicate things)

Step 3: Calculate Total Trip Cost

Factor in:

• Travel expenses (gas, lodging, meals)
• Time value (your hourly rate × hours spent)
• Potential use tax liability

Example: Driving from Seattle to Portland (3 hours round trip) to buy a $3,000 laptop saves $255 in Washington sales tax (9.5%). Trip costs: $40 gas, $25 tolls, 3 hours of time. Net savings: $190 . Worth it.

Step 4: Verify the Seller's Policies

Some retailers in tax-free states still collect tax for out-of-state customers (e.g., Apple Store in Oregon collects tax for California residents if shipping to CA). Always ask before purchasing.

Step 5: Document Your Purchase

Keep receipts and records. If you're audited, you need to prove the purchase was made in a tax-free state and that you paid no tax.

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Key Takeaways

1. Five states have no state sales tax: Alaska (with local exceptions), Delaware, Montana, New Hampshire, and Oregon.
2. Savings are real: A $1,000 purchase saves $84.90 on average versus the national combined rate.
3. Total tax burden matters: Tax-free states often have higher income or property taxes—run the numbers.
4. Wayfair ruling closed loopholes: Most large online retailers now collect tax in all states.
5. Sales tax holidays offer limited savings: 4–8% on specific items for 2–7 days per year.
6. Use tax is legally owed: If you buy tax-free and bring items home, your state expects payment.

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Frequently Asked Questions

Question: Can I buy a car in Oregon and register it in California without paying sales tax? No. California requires you to pay use tax (7.25–10.25%) when registering the vehicle. You'll pay the difference between what you paid (0%) and California's rate. The only exception is if you move to Oregon permanently.

Question: Do tax-free states have higher prices to compensate for no sales tax? Research from the University of Chicago (2022) found that prices in tax-free states are 2–4% higher on average than in neighboring taxed states. This partially offsets the benefit. For example, a gallon of milk in Oregon costs $3.89 versus $3.42 in Washington.

Question: Are groceries tax-free in all states? No. While 32 states exempt groceries, 13 states tax them (Alabama, Arkansas, Hawaii, Idaho, Illinois, Kansas, Mississippi, Missouri, Oklahoma, South Dakota, Tennessee, Utah, Virginia). Hawaii taxes groceries at 4%, while Mississippi taxes at 7%.

Question: Can I use a tax-free state's address to avoid sales tax? This is illegal tax evasion if you don't actually live there. States use databases of registered addresses, and retailers verify billing addresses. Penalties include back taxes plus 10–50% fines.

Question: Do tax-free states have sales tax on services? Generally no. However, New Hampshire taxes prepared food and lodging (9% rooms and meals tax). Oregon taxes prepared food but not groceries. Always check local laws.

Question: What happens if I buy online from a tax-free state retailer? If the retailer has nexus in your state (e.g., Amazon), they collect tax. If they don't (small business), you owe use tax. Most states include a line on income tax returns for this.

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This article is for educational purposes only and does not constitute tax advice. Sales tax laws vary by state and change frequently. Consult a licensed CPA or tax attorney for guidance specific to your situation. The author is not responsible for any actions taken based on this information.

Michael Torres, CPA, has 14 years of experience in multi-state tax planning and has advised over 200 clients on cross-border shopping strategies. He is a member of the American Institute of CPAs and the California Society of CPAs.

Internal links:

• Understanding Use Tax: What Every Shopper Should Know
• Sales Tax vs. Income Tax: Which States Have the Lowest Overall Burden?
• How to Deduct State and Local Sales Tax on Your Federal Return
• The Complete Guide to State Income Tax Rates for 2025
• Nexus Rules for Online Sellers After Wayfair