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Which Is The State With The Lowest Sales Tax Rate In The United States?

Finance BY upasana Nov 11, 2023
Which Is The State With The Lowest Sales Tax Rate In The United States

If you want to know about the state with the lowest sales tax, read through this article to find out the entire picture about the sales tax policy in the United States and which of the states have the lowest percentage of imposition.

The rules for sales tax in the United States may differ from what you may think. There are no federal regulations over the sales tax in the United States. This means each of the states exercises their own control over the sales tax. Only retail transactions and selective services have the sales tax imposed on them.

Whether a state is imposing state sales tax or not, the counties and local municipalities have a high chance of imposing excise tax and surtaxes. For instance, the sales tax in the state of New York is 4%. However, there are additional taxes in New York City itself, which increases the rate to 8.875%.

As of 2023, only five states have the imposition of a 0.000% sales tax. These states include Delaware, Alaska, New Hampshire, Montana, and Oregon. Each of these states may, however, have their own municipalities, which are in charge of imposing income tax, excise tax, and certain taxes imposed on tourist locations.

Key Takeaways

  • Sales tax may factor whenever you are making a purchase, both small and large, by raising the price you are paying over the sticker price.
  • Sales tax is a good source of revenue generation for the state-wide operations. However, there are currently five states that do not impose any sales tax. These states are Delaware, Alaska, Montana, Oregon, and New Hampshire.
  • California has the highest sales tax imposition in the whole nation.

Let’s Learn More About The States With 0.000% Sales Tax

Here is a list of all the states with the lowest sales tax

Delaware

Rather than having a sales tax, Delaware evaluates the gross receipts tax on selective businesses. Delaware makes extensive use of the excise taxes that are levied as flat rates for each gallon on products like alcohol and motor fuel.

The state already has higher corporate income taxes and has an imposition of additional taxes on certain goods and services. This allows the state to exercise a 0% sales and property tax.

“The sales tax in California is the highest tax imposed by any state in America.Puerto Rico, which is a non-state territory, levies an 11.5% sales tax.”

Alaska

While there is no such imposition of sales tax in Alaska, the local governments may still impose taxes on specific goods and services. The sales tax in Juneau is 5%. At the same, Fairbanks and Anchorage do not have sales taxes at all. The average statewide rate for municipalities is 1.76%.

Montana

The state of Montana, overall, has an imposition of 0% sales tax. However, there are certain localities in Montana that act as major tourist attractions and may charge sales tax, which is as low as 3%. These taxes are referred to as the resort and local option tax that helps support the infrastructure that is frequented by a huge number of tourists.

To be able to qualify for these taxes, the city needs to have a permanent population of under 5,500, and these locations include Red Lodge, Whitefish, West Yellowstone, and Big Sky.

New Hampshire

The state of New Hampshire does not have any imposition of sales tax. However, there is a rental and meals tax of 8.5% that is to be paid for already prepared meals in restaurants, room rentals for short terms, and lastly, car rentals. There is also a timber tax which one has to pay at the time of cutting, which accounts for 10% of the value of the wood. This excludes cutting wood for personal use.

Local governments may not declare the sales tax in light of the statewide 0% sales tax. Therefore, the excise taxes are only imposed on the sales of electricity and tobacco.

Oregon

With a zero sales tax statewide, the municipalities in Oregon levy taxes only on specific goods like tobacco and pre-packaged alcoholic beverages. Certain local governments impose sales tax like Ashland’s 5% tax on prepared foods.

Oregon has a relatively high personal income tax in comparison to the other states. However, it does not impose taxes on properties like bonds and stock accounts.

What State Has The Lowest Sales Tax?

What State Has Lowest Sales Tax

The states that have the lowest sales tax are:

  • New York: 4% sales tax rate
  • Georgia: 4% sales tax rate
  • Hawaii: 4% sales tax rate
  • Wyoming: 4% sales tax rate
  • Colorado: 2.9% sales tax rate
  • Delaware: no sales tax
  • Alaska: no sales tax
  • New Hampshire: no sales tax
  • Montana: no sales taxes
  • Oregon: no sales tax

What Is The Most Tax-Friendly State?

What Is The Most Tax Friendly State

If you are looking for the most tax-friendly states in the United States, here is a list that you may refer to:

  • Nevada
  • Wyoming
  • Alaska
  • Tennessee
  • Washington
  • Florida
  • Arizona
  • North Dakota
  • South Dakota
  • Colorado

What State Has The Lowest Income Tax Percentage?

What State Has The Lowest Income Tax Percentage

There are only eight states in the United States that do not impose any income tax. These states are namely:

  • Washington
  • Wyoming
  • Tennessee
  • Texas
  • Nevada
  • Alaska
  • South Dakota
  • Florida

Additionally, New Hampshire has a limitation to its tax interests and the dividend income, and not the income from wages.

Among the states that have an income tax, Pennsylvania’s flat tax of 3.07% ranks Keystone state, becoming the 10th lowest state in 2021.

What Is Texas Sales Tax?

Texas has a sales tax and a use tax rate, which is 6.25%. However, there are certain local jurisdictions, such as counties, cities, transit authorities, and special-purpose districts, that may impose use tax and sales tax of up to 2%. Hence, the total combination of both taxes touches 8.25% as a whole.

What Is California Sales Tax?

California has one of the highest sales taxes in the whole of the United States. The statewide rate of sales tax is 7.25%. In addition to that, certain jurisdictions have extra tax additions in selected districts. This counts for the sales tax in specific districts of California to reach 8.25%.

The Bottom Line 

Now you are aware of the state with the lowest sales tax in the United States. Due to the lack of regulation of the state taxation laws, each state has the right to decide how much they would want to charge as the basic sales tax. While states like California and New York have the highest tax, Montana, Delaware, and New Hampshire have the lowest.

As sales taxes are paid for services like infrastructure and schools, there is a chance that the states with low sales tax will have comparatively high other taxation sources to generate tax revenue.

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Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.

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