5 no-sales-tax states in the USA: The charter of the NOMAD
5 no-sales-tax states in the USA: The charter of the NOMAD
Let’s read on to understand, what’s and how’s of no sales tax states of the USA.
Not only do 45 States + Washington DC impose a Sales tax in the USA, but even cities and municipalities have a different rulebook in their hand, waiting to receive you
“To be or not to be”- The USA Sales Tax laws imbibed this quite literally.
In the seas of Sales tax complexities, five states come by like a cool breeze on a sunny day. Simply known as, NOMAD (New Hampshire, Oregon, Montana, Alaska and Delaware), these 5 states do not have any Sales tax. Yes, you heard that right. Finally, some good news for your good night’s sleep, right?
But, like everything nice in the tax world, NOMAD also hides a grey area between their rainbows.
Where does the government get the banknotes from, then?
Yes, what you’re wondering is correct. We thought so too. The truth is, the NOMAD states try to offset the absence of sales tax revenue by imposing business, income, or excise taxes that are higher than in states with sales tax. The cat is out of the bag!
1. New Hampshire
New Hampshire, truly doesn’t have any type of Sales tax. The state has an interesting tax called the Meals and Rooms (Rentals) Tax- whereby 9% tax is assessed on patrons of hotels (or any facility with sleeping accommodations), and restaurants, on rooms and meals costing $.36 or more.
Local municipal government cannot declare sales taxes but levy excise taxes on sales of tobacco and electricity.
2. Oregon, aka the ‘Beaver State’
The O of NOMAD is the state of Oregon- which does not impose or assess any state-wide sales tax. However, a 5% tax is levied on all prepared food sold in Ashland (Ashland is a city in southern Oregon).
Oregon has a vehicle use tax that applies to new vehicles purchased outside of the state. The tax must be paid before the vehicle can be titled and registered in Oregon.
3. Montana, aka "Treasure State"
Montana is one of five states with no statewide Sales tax. Interestingly, to take a stock of revenue impacts that the implementation of a statewide sales tax would have, the Department of Revenue maintains a sales tax model, which provides revenue estimates based on statewide sales, spending and demographic data. Source
Although this state rejected the Sales Tax regime, excise taxes are levied on the sale of certain products, including alcohol, cigarettes & tobacco, and gasoline.
4. Alaska, aka ‘The Last Frontier’
Alaska doesn’t assess state-wide sales tax but, the cities and boroughs are allowed to enact their own rules on sales tax. So, if someone tells you there is no sales tax, don’t get too excited as a seller to Alaska, because, unfortunately, Alaska’s law also not only allows municipalities to levy a sales tax but also levies a use tax, which is a tax levied on the storage, use, or consumption of goods in a municipality.
Alaska is the largest US state (by area). As a state with a rugged landscape and the least density of population, it is called 'The last Frontier'.
Fun fact:
Alaska as a state doesn’t have a sales tax for Chicken, but there’s currently a 5.5% local sales tax in the town of North Pole (which is an Alaskan city)
5. Delaware, aka ‘The First State’
Delaware doesn't have a sales tax, but it imposes a gross receipts tax.
Delaware’s Gross Receipts Tax is a tax on the total gross revenues of a business, regardless of its source. This tax is levied on the seller of goods or services, rather than on the consumer. Gross receipts tax rates currently range from .0945% to .7468%, depending on the business activity: Source
Delaware was the first to ratify the U.S. Constitution and thus became known as the “First State.” |
Conclusion:
That being said, this doesn’t mean businesses can make jolly and have less comradery with compliance. Businesses located in NOMAD states need to understand, pay attention to, and if necessary, comply with economic nexus laws.
A takeaway for business/sellers:
Although you are located in NOMAD, but sell to residents of states with a sales tax, you can not ignore sales tax. We have curated a potential sales tax obligation assessment tool which by the way is cost-free. Feel free to explore it here.
Amidst these giddying numbers of definitions, rate changes and a cannon of rules waiting to be shot at the seller- tax compliance software, like Avalara, can save the day. As they say, better safe than sorry, we say, better comply than cry.
Let’s solve tax compliance, one filing at a time!
