Introduction to US Sales Tax-Free States
What are Sales Tax-Free States?
In the United States, any product purchased retail or online is subject to sales tax, with rates varying by state, potentially reaching up to 10%. However, five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. These states compensate for fiscal revenue through other forms of taxation, such as property tax, income tax, or gross receipts tax.
Sales Tax Policies by State
| State | State Sales Tax | Local Sales Tax | Digital Goods Tax Features |
|---|---|---|---|
| Alaska | None | Some areas, up to 7.5% | Digital goods may be covered by local sales tax within ARSSTC jurisdictions, depending on the delivery location. |
| Delaware | None | None | Digital goods are completely tax-free, with no state or local sales tax. |
| Montana | None | None | No state or local sales tax on digital goods; consumers are exempt. |
| New Hampshire | None | None | Digital goods are completely tax-free, but certain services (like telecommunications) may involve other taxes. |
| Oregon | None | None | Digital goods are completely tax-free, with no sales tax. |
Alaska
Although Alaska has no state sales tax, it allows local governments to impose local sales taxes, typically ranging from 0% to 7.5%. According to the Alaska Municipal Sales Tax Program, all digital goods and services delivered to ARSSTC jurisdictions are subject to sales tax. The ARSSTC is a coalition of local governments coordinating remote sales tax; currently, it’s estimated that over 100 communities might have local sales taxes. Consumers need to check the specific tax rate for their location; for example, Juneau’s local sales tax rate is 5%.
If you used an Alaska address when registering for an Apple ID, you might be required to pay tax on subsequent in-app purchases. It depends on which city you specified at the time.
Delaware
Delaware has no state sales tax and no local sales tax. Its tax-free policy has remained stable for a long time, making it one of the five US states completely free of sales tax.
For users, Delaware offers the simplest zero-tax environment without worrying about any additional taxes.
Digital goods (such as Steam in-app purchases, Pornhub subscriptions, ChatGPT upgrades, etc.) are completely tax-free in Delaware. Consumers pay no sales tax when purchasing, making it a popular choice for digital goods purchases.
Montana
Montana has no state sales tax, and no local sales tax applies to digital goods. Some cities and resort areas may impose local sales taxes on specific goods (like clothing), but digital goods are explicitly exempt.
According to the Montana Sales Tax Guide, digital services, including Software as a Service (SaaS), are not subject to state or local sales tax. Consumers purchasing items like Google Play in-app content or ChatGPT Plus do not pay sales tax.
New Hampshire
New Hampshire has no general sales tax and no local sales tax, but imposes specific taxes on certain goods and services (like meals, lodging).
Digital goods (such as e-books, streaming subscriptions) are completely tax-free. Software downloads and subscription services do not involve sales tax, although some telecommunications-related digital services might be subject to other taxes (like the 9% Meals and Rentals Tax), but this doesn’t affect general digital goods.
Oregon
Oregon has no state sales tax and no local general sales tax. Legislation has repeatedly rejected proposals to introduce sales tax.
Digital goods are completely tax-free, including downloaded software, subscription services, and in-app purchases. Some cities may have local taxes on prepared food, but this does not apply to digital goods.