Sales tax laws in the United States are not subject to federal regulation, i.e., each State has control over its sales tax.
Tax rates are usually applied on specific retail or service transactions, and some municipalities and counties have additional surtaxes on basic sales taxes.
How do sales taxes work in the United States?
Some products such as groceries, clothing, prescription, and over-the-counter drugs are exempt from the State’s general sales tax, typically with local sales taxes.
However, five states in the country have a 0.000% sales tax: Alaska, Montana, Delaware, Oregon, and New Hampshire. Although they do not impose a sales tax, each has its regulations related to excise taxes, resort taxes, and income taxes.
Alaska has a tax on commercial vessels
Despite not having a sales tax in the State, each local government can impose tariffs on some goods and services. While Juneau has a 5% sales tax, Fairbanks and Anchorage have no sales tax.
Here, the lowest tax is on gasoline, which is 8.95 cents per gallon. However, sales taxes apply to alcoholic beverage wholesalers and distributors at a flat rate.
Passengers on commercial vessels with overnight accommodations have an excise tax of $34.50 and must add additional taxes for motor fuel.
Delaware Cigarette Tax
Although they do not have a sales tax, Delaware does have a gross receipts tax for some businesses. The State uses excise taxes levied flatly per gallon on products such as fuel and alcohol.
It has a $2.10 tax on each pack of cigarettes, and its corporate income taxes are higher than other states in the country. Despite this, Delaware remains an attractive state for art dealers and collectors.
There are no taxes for their products, and they come searching to leave behind high tax bills for selling paintings and art-related pieces.
Montana Tourist Tax
Montana is known for being one of the states visited by more tourists, and that is why it is where more resorts are located. All of these resorts are under a local option or tourist tax.
The sales tax on these establishments is 3%, still lower than other taxes in other states in the country.
Oregon Tobacco Tax
Tobacco has an excise tax just like alcoholic beverages in Oregon; its income tax is the highest compared to others. However, it does not tax intangible property.
New Hampshire Prepared Meals Tax
The tax for prepared foods is 9% in New Hampshire; you also find a 7% tax on telephone services and a $0.75 per $100 tax on real estate sales.
Some interest is also taxed on the sale of tobacco and electricity. Likewise, New Hampshire’s tax treatment remains favorable because its income tax is only subject to interest and dividend income.
Each State imposes its own sales tax
All governments must levy relevant taxes in different sectors to maintain a functional state. There is no sales tax in the five states mentioned above, but it does not mean you will not pay any tax.
Depending on your sector, you can make a good profit in one of the states mentioned above. Being able to avoid paying certain taxes is beneficial when done legally.
Likewise, you must make the pertinent revisions before starting a new business; each State has its rules and conditions regarding the taxes you must pay.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.