Are There States With No Sales or Income Tax?

It’s a thought many of us have had: wouldn't it be amazing to live in a state where you don't have to worry about sales tax every time you buy something, and you don't have a chunk of your paycheck eaten up by state income tax? The idea of keeping more of your hard-earned money and spending less on everyday purchases sounds like a dream. This guide is here to unravel the truth behind this appealing concept, exploring which states might come close and what the real tax landscape looks like.

The Dream of No Sales or Income Tax: Is It Possible?

The allure of a life free from both state sales tax and state income tax is incredibly strong. We all feel the pinch when we see our paychecks after taxes, or when the final price at the register is higher than we expected. It's frustrating to work hard and then see a significant portion of your income disappear into various government coffers. You might imagine a state where your money stretches further, allowing you to save more, invest more, or simply enjoy a higher quality of life.

The Reality Check: No State is Truly "Tax-Free"

Let's be upfront: the idea of a completely tax-free state in the U.S. is largely a myth. While some states might be lauded as "tax-friendly" because they lack one major tax, like an income tax, or another, like a sales tax, no state exists without any form of taxation. Governments need revenue to function, plain and simple. They're responsible for maintaining roads, funding schools, providing public safety, and supporting countless other essential services that make our communities livable.

So, when you hear about states with low taxes, it’s always a matter of trade-offs. If a state isn't collecting revenue through a broad-based income tax or a statewide sales tax, it has to make up that money somewhere else. This often means higher property taxes, excise taxes on specific goods like gasoline, tobacco, or alcohol, or even specific taxes on industries that are prominent in that state. The overall "tax burden" on its residents can still be substantial, even if it's structured differently. It's a classic case of robbing Peter to pay Paul, just at a state level. When you're considering a move, it's crucial to look at the entire picture, not just one piece of the puzzle.

Why States Need Revenue (Even "Tax-Friendly" Ones)

It's easy to grumble about taxes, but it's important to remember why they exist. States aren't just collecting money for fun; they're funding the infrastructure and services that we all rely on every single day. Think about it: when you drive on a well-maintained highway, send your kids to a public school, or call 911 in an emergency, those services are paid for by taxes.

States use various methods to generate revenue. Income taxes are often a significant source, taxing wages, salaries, and investment income. Sales taxes add a percentage to the cost of goods and services. Property taxes, levied on real estate, fund local services like schools and fire departments. Beyond these big three, states also collect money through:

• Excise taxes: Taxes on specific goods like gasoline, cigarettes, alcohol, and sometimes even sugary drinks. These are often built into the price, so you might not even realize you're paying them directly.
• Corporate income taxes: Taxes on the profits of businesses operating within the state.
• Estate or inheritance taxes: Taxes on the value of a deceased person's property transferred to their heirs.
• Severance taxes: Taxes on natural resources extracted from the state, like oil, gas, or minerals.
• License fees and permits: From driver's licenses to business permits, these also contribute to state coffers.

So, while the dream of no sales or income tax is appealing, the reality is that states must find ways to fund their operations. The question then becomes: how do they choose to collect that revenue, and how does it impact your personal finances? SmartAsset often provides detailed breakdowns of how states fund their budgets, offering valuable insights into these revenue streams.

States Without a State Income Tax

When people talk about moving to a "tax-friendly" state, often the first thing that comes to mind is avoiding state income tax. It's true that a handful of states don't tax your wages, and for many, that alone can represent significant savings, especially for high earners.

The Current Landscape of No Income Tax States

Currently, there are nine states that do not impose a broad-based individual income tax on wages and salaries. These are:

1. Alaska: No state income tax.
2. Florida: No state income tax.
3. Nevada: No state income tax.
4. South Dakota: No state income tax.
5. Texas: No state income tax.
6. Washington: No broad-based state income tax on wages, but it does have a capital gains tax (7% on capital gains exceeding $250,000, with some exemptions). This is a newer development and doesn't apply to general income.
7. Wyoming: No state income tax.
8. Tennessee: Historically taxed interest and dividends, but this has been fully phased out and repealed. So, effectively, no state income tax on any income.
9. New Hampshire: Historically taxed interest and dividends, but this tax is currently being phased out and is set to be fully repealed in 2027. So, while technically still having a very limited income tax for a short period, it's moving towards a complete absence of income tax.

For those interested in the finer details of these states, you might find more comprehensive information in our guide on States With No Income Tax (2026 Full List). The key takeaway here is that if you earn a substantial income from wages, living in one of these states could mean a noticeably larger take-home pay compared to living in a state like California or New York, which have some of the Highest Income Tax States in 2026.

How These States Fund Themselves Otherwise

It’s crucial to understand that "no income tax" doesn't mean "no taxes." These states simply generate their revenue through other means, often shifting the tax burden to sales taxes, property taxes, or other fees.

For instance, Florida famously relies heavily on tourism and a statewide sales tax rate to fund its operations. While you won't pay state income tax, you'll feel the sales tax on most purchases, and property taxes can be substantial, especially in desirable coastal areas. Similarly, Does Florida Have State Income Tax? is a common question, and while the answer is no, it's vital to consider other taxes.

Texas also foregoes state income tax, but it compensates with some of the highest property taxes in the nation. If you own a home in Texas, you'll quickly realize where the state makes up its revenue. Property tax rates in major metropolitan areas like Houston or Dallas can be significantly higher than in states that collect income tax. This trade-off is often what people consider when looking at Does Texas Have State Income Tax? versus its property tax burden.

Washington State, despite not having a broad-based income tax on wages, does impose a sales tax and has notably high property taxes in populous areas, alongside its newer capital gains tax. This demonstrates how states find creative ways to generate revenue. You can delve into the specifics of Does Washington Have State Income Tax? to understand its nuances.

Even New Hampshire, which is phasing out its interest and dividends tax and has no statewide sales tax, has some of the highest property taxes in the country. This is a classic example of how the absence of one tax often means the amplification of another. This makes articles like Does New Hampshire Have Income Tax? crucial for anyone considering a move.

The point is, these states aren't running on fumes. They have robust economies and public services, all funded by revenue sources that simply differ from those in states with income taxes. Understanding these alternative revenue streams is essential for any financial planning or relocation consideration. This phenomenon is often explored in articles discussing States With No Income Tax but High Other Taxes, which highlight the alternative tax burdens.

States Without a State Sales Tax

While income tax often gets the most attention, sales tax is another significant drain on our wallets, impacting virtually every purchase we make. The idea of buying goods and services without that extra percentage tacked on can be very appealing, particularly for consumers who spend a lot.

The Exclusive Club: States That Don't Charge Sales Tax

It's a much smaller club than the "no income tax" states. There are only five states that do not levy a statewide sales tax:

1. Delaware: No statewide sales tax.
2. Montana: No statewide sales tax.
3. New Hampshire: No statewide sales tax.
4. Oregon: No statewide sales tax.
5. Alaska: While Alaska has no statewide sales tax, many of its local jurisdictions (cities, boroughs) do impose their own sales taxes. These local taxes can be quite high, sometimes reaching up to 7.5% in some areas, so it's not truly sales-tax-free across the board. Always check local rates if you're considering Alaska.

Imagine buying a new car, a large appliance, or furnishing an entire home without adding an extra 5-8% to the total bill. For residents in these states, this can translate into considerable savings over time, especially on big-ticket items. If you want to dive deeper into how states compare on this front, checking out resources like state sales tax rates 2026: all 50 states ranked can provide a comprehensive overview.

Balancing the Budget Without Sales Tax Revenue

Just like states without an income tax, these states still need to fund their essential services. Without a statewide sales tax, they rely more heavily on other forms of taxation to keep things running.

Oregon, for instance, makes up for its lack of sales tax with a relatively high progressive state income tax. So, while your shopping cart might look cheaper, your paycheck might feel a bit lighter. Delaware also relies on an income tax, though it's structured a bit differently, and property taxes play a role.

New Hampshire is an interesting case, as we've mentioned. It has neither a statewide income tax (phasing out the interest and dividends tax) nor a statewide sales tax. However, this is largely balanced by its significantly higher property taxes. For many residents, the savings from not paying sales or income tax are offset by higher housing costs and property tax bills. This is a prime example of why looking at the overall State Tax Burden by State 2026 is more informative than focusing on just one type of tax.

Montana also has no statewide sales tax, and instead relies on income tax, property tax, and resource taxes. In Alaska, where there's no state income tax or statewide sales tax, a significant portion of the state's revenue comes from oil and gas severance taxes. This allows the state to offer benefits like the Permanent Fund Dividend, but residents in many localities still face local sales and property taxes. This dynamic illustrates the complex financial models states employ.

When evaluating these states, it's essential to consider your personal financial situation. If you're a heavy consumer of goods and services, a no-sales-tax state might seem appealing. But if you're a high earner, the higher income tax in a state like Oregon could negate those savings. That's why tools and analyses provided by financial sources like SmartAsset are so helpful for understanding the full financial impact.

The Elusive "No Sales or Income Tax" State

Now for the million-dollar question: are there any states that manage to avoid both a broad-based state income tax and a statewide sales tax? It's the ultimate tax-friendly dream for many, but as we've hinted, the reality is a bit more nuanced.

Examining the Intersection: Are There Any Overlaps?

Let's cross-reference our two lists – the nine states without a broad-based income tax and the five states without a statewide sales tax.

States with NO state income tax:

• Alaska
• Florida
• Nevada
• New Hampshire (income tax on interest/dividends phasing out)
• South Dakota
• Tennessee (income tax on interest/dividends repealed)
• Texas
• Washington (capital gains tax, but no broad-based income tax)
• Wyoming

States with NO statewide sales tax:

• Delaware
• Montana
• New Hampshire
• Oregon
• Alaska (many local sales taxes)

Looking at these two lists, only two states appear on both: Alaska and New Hampshire.

However, we need to dig a little deeper into these two:

• Alaska: While Alaska has no statewide income tax and no statewide sales tax, it's crucial to remember that many local jurisdictions in Alaska do impose sales taxes, and some can be quite high. So, for practical purposes, depending on where you live in Alaska, you might still be paying sales tax. The state itself also relies heavily on oil revenue and local property taxes.
• New Hampshire: This state has no statewide sales tax and is in the process of phasing out its limited tax on interest and dividends, effectively making it a no-income-tax state. This sounds like the perfect combination! But, there's a significant catch: New Hampshire has exceptionally high property taxes. In fact, it consistently ranks among the states with the highest property tax rates in the nation. This is how it funds its local services and state operations without those two major tax revenue streams.

So, while New Hampshire technically comes closest to the ideal of having neither a state income tax nor a statewide sales tax, its very high property taxes mean it's far from a "tax-free" haven. Similarly, Alaska offers state-level relief, but local taxes can still catch you off guard. The answer to "Are There States With No Sales or Income Tax?" is a resounding no when you consider the full picture of state and local taxation.

The Trade-Offs: Understanding the Full Tax Picture

The search for a state with no sales or income tax inevitably leads to understanding trade-offs. No state can provide services without funding, and if those funds aren't coming from income or sales taxes, they're coming from somewhere else. For individuals and families, this means comparing tax structures to find what works best for their specific financial situation.

For instance, a retiree living in New Hampshire might enjoy not paying sales tax on purchases and benefiting from no state income tax on their pension or Social Security. However, if they own a valuable home, their property tax bill could be a substantial expense. On the other hand, someone with a high income but who rents and rarely makes large purchases might prefer a state with low income tax but higher sales tax, like Florida.

Here's a simplified look at the trade-offs in some of these states:

State (2026)	State Income Tax	State Sales Tax	Key Other Taxes / Considerations	Closest to No Sales/Income?
Alaska	No (Broad-based)	No (Statewide)	High local sales & property taxes in some areas; oil revenue	Yes, at state level (but watch local taxes)
Delaware	Yes	No (Statewide)	Moderate income tax, property taxes, corporate taxes	No (Has income tax)
Florida	No (Broad-based)	Yes (Statewide)	High property taxes, tourism taxes	No (Has sales tax)
Montana	Yes	No (Statewide)	Income tax, property taxes, resource taxes	No (Has income tax)
Nevada	No (Broad-based)	Yes (Statewide)	High sales tax, gaming taxes, property taxes	No (Has sales tax)
New Hampshire	No (Div/Int phasing out)	No (Statewide)	Very high property taxes	Yes, but very high property taxes
Oregon	Yes	No (Statewide)	High progressive income tax, property taxes	No (Has income tax)
South Dakota	No (Broad-based)	Yes (Statewide)	Sales tax, property taxes, limited corporate tax	No (Has sales tax)
Tennessee	No (Broad-based)	Yes (Statewide)	High sales tax, property taxes	No (Has sales tax)
Texas	No (Broad-based)	Yes (Statewide)	Very high property taxes, sales tax	No (Has sales tax)
Washington	No (Broad-based)	Yes (Statewide)	Sales tax, high property taxes, capital gains tax	No (Has sales tax)
Wyoming	No (Broad-based)	Yes (Statewide)	Sales tax, property taxes, resource taxes	No (Has sales tax)

As this table illustrates, every state has a unique approach to taxation. What might be low in one area is often high in another. This is why when you're thinking about a move, you really need to do your homework and look beyond the headlines. Consider your income sources, spending habits, and whether you plan to own property. Resources like SmartAsset can help you calculate the overall impact of taxes in different states, giving you a clearer picture of your actual financial burden. Exploring the Cost of Living vs Taxes by State can further assist in making an informed decision about where your money will go furthest.

Disclaimer

Please remember that tax laws are complex and can change frequently. This information is intended for general guidance and informational purposes only, and does not constitute financial, legal, or tax advice. Always consult with a qualified tax professional or financial advisor for personalized advice regarding your specific tax situation.