Why is Delaware the Best Sales Tax-Free State?

As mentioned in the previous blog post, Delaware is the top choice for a sales tax-free address. Why? Delaware is considered to offer the “simplest zero-tax environment” among the five sales tax-free states. The comprehensiveness and consistency of its tax policies surpass the other four states (Alaska, Montana, New Hampshire, Oregon).

Advantages of Delaware

1. Complete Exemption from State and Local Sales Tax Delaware has no state sales tax and no local sales tax. This double exemption applies to all goods and services, including digital goods (like Apple Store in-app purchases, Steam games, Pornhub subscriptions, etc.). When consumers purchase in Delaware, the price paid is the listed price, without considering any additional sales tax.

2. No Complex Local Variations Delaware’s tax policy is uniform statewide, unlike other states where local jurisdictions can decide whether to impose additional taxes. This eliminates the hassle for consumers of calculating taxes based on specific locations.

3. Clear Exemption for Digital Goods Delaware explicitly exempts digital goods and services (including downloads, subscriptions, etc.) from sales tax, and there are no additional “special taxes” or “use taxes” that directly affect the consumer purchasing experience.

4. Business-Friendly Policies Delaware generates revenue through a Gross Receipts Tax rather than sales tax. This tax is borne by businesses and is not directly passed on to consumers. Therefore, consumers don’t need to worry about hidden additional taxes.

Comparison with Other States

1. Alaska Although there is no state sales tax, local governments can choose to levy local sales taxes (up to 7.5%). For digital goods, the Alaska Remote Seller Sales Tax Commission (ARSSTC) may require taxes on remote sales (including digital goods) in certain jurisdictions.

2. Montana Montana has no state sales tax, and digital goods are explicitly exempt. However, inconsistencies in Montana’s local tax policies in other areas might reduce consumer confidence in the “zero-tax” environment.

3. New Hampshire New Hampshire has no general sales tax, and digital goods are exempt. However, it imposes additional taxes on specific services (like meals, lodging, telecommunications), such as a 9% meals and rentals tax, which could extend to certain digital services (like telecom-related subscriptions).

4. Oregon Oregon has no state sales tax and no local general sales tax; digital goods are completely exempt. Proposals to introduce sales tax have been repeatedly rejected historically.

Summary

Overall, regarding digital goods, Delaware and several other states are sales tax-free (except Alaska).

• Consistency: Delaware is the only state with absolutely no sales tax at both the state and local levels, without local tax variables like Alaska or service tax exceptions like New Hampshire.
• No Additional Tax Interference: Unlike New Hampshire with its specific service taxes or Alaska with local taxes, the tax burden on consumers in Delaware is truly zero, with no hidden “additional fees.”
• Stability: Delaware’s tax-free policy has remained stable for a long time, with no frequent discussions about introducing sales tax like in Oregon, eliminating consumer worries about policy uncertainty.