The Complete Guide to America's Five Sales Tax-Free States: Where Does Delaware Actually Stand?

When shopping across the United States, most consumers face an unwelcome surprise at checkout—sales taxes that weren’t reflected on shelf prices can add 5% to nearly 10% to your bill. However, a small handful of states offer relief from this burden. Understanding these tax havens requires looking beyond just sales tax rates and examining the full picture of state taxation.

Delaware: Exploring the Tax-Free Reality

Delaware often comes up in conversations about favorable tax environments. The state genuinely offers no state sales tax, and importantly, local jurisdictions are prohibited from imposing their own sales taxes either. This distinguishes Delaware tax free policies from other states where local taxes still apply.

However, the narrative of Delaware being entirely tax-free requires nuance. While shoppers enjoy sales tax relief, the state compensates through gross receipts taxes on specific businesses and excise taxes on commodities like gasoline and alcohol. Residents face a notably higher income tax burden compared to national averages, which offsets the sales tax advantage.

Four Other States Without Sales Tax

Beyond Delaware, four additional states have eliminated state-level sales taxes entirely.

Alaska stands out for residents willing to embrace frontier living. The state charges neither state sales tax nor state income tax—a rare combination. Yet local exceptions exist: while major cities like Anchorage and Fairbanks avoid sales tax, Juneau Borough imposes a 5% rate. This creates a patchwork system where your actual tax obligation depends on specific municipality.

Montana similarly offers no state or local sales taxes across most of its territory. However, temporary visitors may encounter resort taxes on hospitality services, and permanent residents contend with steep income tax rates that largely counterbalance sales tax savings.

New Hampshire aligns with its “live free or die” ethos by eliminating both state and local sales taxes plus state income taxes. The trade-off appears significant: property owners pay among the nation’s highest property tax rates, and luxury items like restaurant meals face additional taxation.

Oregon occupies an interesting position—situated below California, which has among America’s highest sales tax rates. Oregon has pursued the opposite path with zero state and local sales taxes. Nonetheless, tobacco, alcohol, and certain prepared foods face excise taxes, while the state maintains one of the highest income tax rates nationwide.

The Hidden Trade-Off: Looking at Total Tax Burden

Each state without sales tax compensates through alternative revenue mechanisms. Policymakers typically shift the burden toward income taxes, property taxes, or selective excise taxes. Residents comparing states cannot focus solely on sales tax elimination—the complete tax picture matters significantly.

Alaska’s lack of income tax seems advantageous until considering property tax implications. Delaware’s sales tax-free status must be evaluated alongside gross receipts taxes. New Hampshire’s elimination of both sales and income taxes comes paired with exceptional property tax obligations.

Understanding that states fund essential services—schools, libraries, infrastructure—through taxation remains crucial. No state achieves a truly tax-free environment; rather, different states distribute taxation responsibility differently across income sources, consumption, and property ownership.

When evaluating relocation or comparing financial obligations across states, comprehensive tax analysis examining income, property, and consumption-based taxes provides far more useful guidance than focusing on any single tax type. The five states without sales taxes offer genuine savings in one category while typically requiring compensation elsewhere.