If you‘re an avid shopper like me, paying sales tax on every purchase can be a real drag. The bite from sales taxes adds up quickly, making big purchases like electronics, jewelry, and furniture even more expensive. But here‘s some good news fellow shoppers – there are still plenty of great options for tax-free shopping across parts of the United States!
In this detailed guide, I‘ll walk you through everything you need to know to shop tax-free and avoid paying unnecessary sales taxes legally. I‘ve done thorough research and gathered insights from tax experts to breakdown sales tax policies in each state. I‘ll also share some savvy tips I‘ve learned to maximize your tax-free purchases. So let‘s get started!
How Sales Taxes Work in the United States
Before diving into tax-free shopping opportunities, it helps to understand how sales tax works in America. Unlike a value-added tax (VAT) in many countries, the U.S. federal government does not impose any national level sales tax. However, states and local governments can choose to charge their own sales taxes.
As of 2024, 45 states plus Washington D.C. have state-level sales taxes ranging from 2.9% to 7.25%. On top of that, many counties, cities, and towns tack on local sales taxes too. For example, the sales tax in New York City consists of the 4% New York state sales tax plus an additional 4.875% local tax. So combined state and local sales taxes can reach 10-11% in some areas.
According to the Tax Foundation, the five states with the highest average combined state and local sales tax rates are Tennessee (9.53%), Louisiana (9.52%), Washington (9.23%), Alabama (9.22%), and Arkansas (9.20%). The five states with the lowest average sales tax rates are Alaska (1.76%), Hawaii (4.44%), Wyoming (5.34%), Wisconsin (5.43%), and Maine (5.5%).
Now let‘s look at the key exceptions that make tax-free shopping possible…
5 States With No Sales Tax to Shop Tax-Free
Despite most states charging sales tax, there are still 5 states that manage to hold out without a statewide sales tax:
Alaska – While Alaska has no statewide sales tax, local cities and boroughs can levy sales taxes up to 5%. For example, Anchorage charges a 5% sales tax on goods.
Delaware – The First State is the best state for tax-free shopping! Delaware has no state or local sales taxes at all. Though it does have a gross receipts tax on businesses.
Montana – Big Sky Country mostly lives up to its tax-free reputation. While Montana has no state sales tax, resort cities can charge local sales taxes up to 4%.
New Hampshire – The Granite State takes pride in being a retail haven with no general sales tax. However, prepared meals and hotel stays are taxed at 9%.
Oregon – Oregon is the gold standard for tax-free shopping with zero state and local sales taxes. Though some minor exceptions apply to hotels, gas, and hospitals.
So for the biggest savings on your next big purchase, these pioneering tax-free states are your best bet. Keep reading to learn more about specific tax-free shopping destinations.
Sweet Tax-Free Shopping Spots in Zero Tax States
Not all cities and towns in the zero tax states above offer full tax-free shopping. But if you know where to go, the savings are real. Here are some of my favorite spots for tax-free shopping trips in these states:
Anchorage, Alaska – As Alaska‘s largest city, Anchorage offers the most shopping options with just a 5% sales tax on goods. Stock up on jewelry, watches, electronics, clothing, furniture, appliances, and more with tax savings of 10-15% or more over taxed states.
Rehoboth Beach, Delaware – Delaware‘s iconic beach town is a true tax-free paradise. With no state or city sales taxes, savor the full tax-free life while shopping for summer gear, souvenirs, home goods, and anything else you fancy!
Helena, Montana – While not the cheapest place to visit, Montana‘s small capital city still upholds the state‘s tax-free values. All general purchases are blissfully tax-free for your shopping pleasure.
Salem, New Hampshire – As the capital of the "Live Free or Die" state, Salem offers a pleasant New England shopping escape with a tax-free twist. Just watch out for the 9% prepared meals tax.
Portland, Oregon – With zero state and local sales taxes, Oregon‘s largest city provides a world-class shopping scene completely tax-free! Load up on goodies at affordable PDX prices.
Digging Into State & City Sales Tax Rates
To find even more tax-free and low tax places to shop in the US, it pays to look closely at state and city sales tax rates across the country.
As a baseline, here are the five states with the lowest sales tax rates as of 2024 according to the Tax Foundation:
| State | State Sales Tax Rate |
|---|---|
| Alaska | 0% |
| Delaware | 0% |
| Montana | 0% |
| New Hampshire | 0% |
| Oregon | 0% |
And here are a few examples of major cities with low sales tax rates:
| City | Combined City & State Sales Tax Rate |
|---|---|
| Anchorage, AK | 5% |
| Birmingham, AL | 4% |
| Cheyenne, WY | 6% |
| Honolulu, HI | 4.5% |
| Madison, WI | 5.5% |
On the flip side, you‘ll want to avoid these places with the highest sales tax rates:
| State | Highest State Sales Tax Rate |
|---|---|
| California | 7.25% |
| Indiana | 7% |
| Mississippi | 7% |
| Rhode Island | 7% |
| Tennessee | 7% |
And these major cities with eye-watering tax rates:
| City | Total Combined Sales Tax Rate |
|---|---|
| Chicago, IL | 10.25% |
| Long Beach, CA | 10.25% |
| Seattle, WA | 10.1% |
| Birmingham, AL | 10% |
| Decatur, AL | 11% |
As you can see, sales tax rates vary tremendously across the country from 0% up to 11%! So a savvy shopper always does their tax homework before making large purchases.
Categories Exempt From Sales Tax
Another key way to save on sales tax is to buy products that are exempt from tax even in tax imposing states. Here are some common items excluded from sales tax:
Clothing – Most states exclude clothing from sales taxes or only tax beyond a price threshold like $110 per item in New York. Stock up on apparel!
Food & Groceries – Roughly 30 states exempt food and groceries from sales taxes, while others tax at reduced rates (e.g. 2% in New York). Buy in bulk!
Prescription Drugs – Nearly all states exclude prescription medications from sales tax which helps patients manage costs.
Trade-In Allowances – Eligible states like California exclude the trade-in value from sales tax on new items, saving big bucks on car upgrades.
Sales Tax Holidays – Some states provide temporary tax relief on items like back to school supplies during designated holidays.
Use Tax – Not an Issue for Consumer Purchases
If you‘re buying goods tax-free across state lines, you may wonder about use tax which aims to prevent tax evasion. Use tax applies to items purchased out-of-state and brought back home for use in one‘s home state. This mainly targets businesses but rarely affects individual consumer purchases.
For instance, if you‘re an Oregon resident and buy a TV tax-free in California, you technically owe Oregon use tax on it. But Oregon does not enforce use tax on temporary personal purchases like this when bringing items home.
So use tax is not something most consumers need to worry about when buying items out-of-state for personal use. However, stricter use tax rules apply when starting an online retail business, so consult a tax pro for guidance.
Online Shopping – Tax Gaps Closing After Supreme Court Ruling
Until recently, online shopping provided a handy loophole for dodging sales tax by purchasing from out-of-state internet retailers. But following the 2018 Supreme Court decision in South Dakota v. Wayfair Inc., the tide has turned.
The ruling paved the way for states to collect sales tax from online sellers even if they have no physical presence in the state. As a result, major e-tailers like Amazon now have to charge sales tax in most states based on certain economic thresholds.
Still, for very large purchases, it can be worth checking if certain online retailers don‘t yet collect sales tax in your state, even if it may technically be owed. Just know that tax gaps for online shopping will continue shrinking in coming years.
Tips for Scoring More Tax-Free Shopping Wins
Now that you‘ve got all the sales tax ins and outs covered, here are some of my top insider tips for maximizing your tax-free shopping exploits:
Time purchases right – For big ticket items, aim to buy at the optimal time whether it‘s a sales tax holiday in your state or right before moving to a tax-free state.
Shop in person – For really large purchases, shop at physical stores in tax-free states instead of online to avoid use tax obligations.
Get sales tax refunds – If required to pay sales tax upfront out-of-state, submit refund forms promptly to get your hard-earned money back.
Leverage exemptions – Stock up on groceries, medications, apparel, and other tax-exempt necessities to keep more cash in your wallet.
Mind the margins – Compare tax savings against travel costs when planning tax-free out-of-state shopping trips to maximize your net savings.
Enjoy Your Tax-Free Retail Therapy!
As a shopaholic myself, I‘m thrilled to see some great options still exist for tax-free shopping in the U.S. With the right planning and some road trips to zero tax havens like Delaware or Oregon, you can save hundreds to thousands in unnecessary taxes on life‘s big purchases.
Keep this guide handy and remember to always check state sales tax rates before any major shopping excursion. Have fun and shop smart my fellow bargain hunters! Splurge on those "must-have" items with the extra savings.
