Should I Consider Living In States With No Sales Tax?

Benjamin Franklin once said that the only two things in life that are certain are taxes and death. No matter how disliking one might find tax-paying, it is inevitable for any economy. But the real question is whether you should move to states with no sales tax or not. 

Taxes are always a headache, and it might appear that they add an extra financial burden to your budget. Now, one may think, why reside in a state that taxes personal income? In order to answer such questions of my readers and give them a clear insight, I have curated this comprehensive guide. 

Let’s get started… 

What Are Sales Taxes In General? 

A sales tax is nothing but a consumption tax that has been imposed by the state government after there has been a sale of products and services. Traditional sales taxes are levied when the sale takes place- the retailer used to collect them. This was later passed on to the federal government.

In a provided jurisdiction, businesses can be liable for potential sales taxes if it is present there. Now, it can either be a brick-and-mortar store, an affiliate, or an employee- based on the jurisdiction laws. Outside the U.S.A., there are various states that offer no sales tax. 

List Of States With No Sales Tax At All? 

Before proceeding with whether you should consider moving to a tax-free state or not, you must first know which states do not tax personal income. As of the year 2023, these five states impose zero sales tax as individual municipalities for imposing excise taxes and income taxes. Here are the states: 

Alaska 

The state of Alaska does not practice sales taxes or personal income state tax collection. But, a lot of its municipalities might impose up to 7% of sales tax (as known for 2022). Additional local taxes might also be levied on stuff like hotels, tobacco, liquor, and fish. Moreover, Alaska imposes an individual property tax on the corporate and local level, which is no less than 9.40%.

Montana

Both the local and state governments in Montana levy any sales tax. Until 2022, it continued to impose a modest personal income tax that ranged upto 6.75%. Out of the states with no sales tax, Montana levies an individual property tax or real estate taxes on properties owned for the upcoming taxable year. Since the state attracts a number of tourists, they charge reduced sales taxes, which might cost only 3%.

Delaware

Rather than levying a sales tax, Delaware state exercises a gross receipt tax on some specific businesses. Excise taxes imposed on products like alcohol and motor fuel in the form of a flat rate per gallon are mostly enjoyed by Delaware. As a result, this state consists of relatively higher corporate sales and income tax. It imposes other taxation on certain products and services, resulting in 0% sales and property taxes.

Oregon

Oregon and its municipalities exercise taxes on specific products with no statewide sales tax. These products might include prepackaged alcohol and tobacco. Certain local governments leverage sales taxes like the 5% tax Ashland imposes on prepared food items. The state consists of a higher individual income tax as related to other states. However, it cannot tax bonds, stock accounts, and other intangible properties.

New Hampshire

In the list of states with no sales tax, we have New Hampshire next. The state does not levy a state sales tax, although a rental and meals tax exists. It is only 8.5% and is imposed on prepared foods in restaurants, car rentals, and short-duration room rentals. The most distinguished fact about the state is that it imposes timber taxes while cutting at the wood’s 10% value. Local governments do not impose sales tax on electricity or tobacco. 

So, Should I Reside In Any Of These Places? 

Coming back to the question, there are various factors that decide whether you should move to states with no sales tax or not. Below, I have cataloged the section into the pros and cons of no sales taxes in a state, which will help you understand the facts better. Hence, continue reading:

Pros: You have to pay zero state income tax

When you do not have to pay any sales tax, ultimately, you would be saving a lot in your wallet. There are other states, too, that exercise a millionaire tax, under which you have to pay higher taxes if your income is tremendous. For instance, California charges an income tax of 13.3% when there is a 1% wealth tax.

Cons: Reduced Public Services

States with zero income tax usually have fewer funds for sponsoring government services such as healthcare and education. As per Forbes, states like Florida, Wyoming, and South Dakota- which do not levy income tax, are the most expensive when it comes to healthcare services. Ultimately, there is a lack of public service spending that reduces availability and quality. 

Pros: Retirement-Friendly

States without income are prone to attract more people towards them. Being a retiree, you might have a fixed income. This simply indicates that every dollar is valuable, and not paying state income tax might simply make your retirement easier. States with no sales tax might offer a favorable tax environment in the cases of pensions, social security perks, etc. 

Cons: Limited Deduction On Taxes

One of the biggest drawbacks of states without sales tax is that it provides limited tax deductions that one can claim on their federal income tax returns. The reason is some deductions are available only for taxpayers who wish to itemize them. In case you do not want to pay state sales tax, you might be losing ample deductions that might exceed the standard deduction. 

Wrap Up

Planning a new life in states with no sales tax has its share of benefits and drawbacks. While you might be having a greater take-home amount, there will also be reduced facilities on government services. 

So, no matter what’s your ultimate decision, make sure to have careful consideration. Taxes play a significant role in how we stabilize our financial journey. 

With these words, I wrap up my article. But I hope it enlightened you on whether you should consider making such a big move. If you are already living in a state that imposes zero sales tax, do not forget to share your experiences in the comment box. 

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