Summary: This blog identifies 5 states with no sales tax and what that really means.
What is sales tax and why is it imposed? That is a good question. Sales tax is basically a tax that is imposed by the government to help raise revenue. Currently, there are forty-five states plus the District of Columbia that impose a state sales tax. This leaves five states with no state sales tax. These states can easily be remembered with the acronym, NOMAD, New Hampshire, Oregon, Montana, Alaska, and Delaware.
Some people have asked us whether or not the South Dakota v. Wayfair ruling in 2018 has affected sales tax in any of these states? Let’s take a closer look.
Alaska
While Alaska does not have a state sales tax, some of the localities are set up to charge sales tax. As of the writing of this blog, there are currently eleven jurisdictions that will be collecting sales tax from remote sellers.
Delaware
While Delaware does not have a state sales tax, they do impose a Gross Receipts tax. Unless otherwise specified by a Delaware statute, then the term “gross receipts” is comprised of the total receipts of a business received from goods sold and services rendered in the state of Delaware. Please read the blog linked above for more information about Gross Receipts tax in Delaware.
Montana
The Wayfair decision does not affect Montana residents purchasing goods or services online because the state of Montana does not have a general sales tax. While Montana does not have a state sales tax, they do have several other tax options that cover specific businesses, services or locations. Please go to the Montana Department of Revenue website for more information.
New Hampshire
While New Hampshire does not have a state sales tax, they do have other tax options. Please visit the New Hampshire Department of Revenue for more information.
Oregon
The Wayfair decision does not affect Oregon residents purchasing goods or services online because the state of Oregon does not have a general sales tax. Effective January 1, 2020, Oregon implemented a Corporate Activity Tax (CAT). The CAT is imposed on businesses for the privilege of doing business in the state of Oregon. The CAT is not a transactional tax, such as a retail sales tax, or an income tax. Oregon’s CAT is measured on a business’s commercial activity–the total amount a business realizes from transactions and activity in Oregon. For more information, please visit the Oregon Department of Revenue Corporate Activity Tax FAQ page
While Oregonians purchasing goods or services online generally don’t owe sales tax to other states, exceptions may exist for other taxes. For example, when making online travel arrangements, Oregon residents will be charged federal taxes on airline tickets. Oregon residents may also be charged state and local taxes on hotel or rental car fees.
For more business tax information, please visit the Oregon Department of Revenue website.