Which States Have No Income Tax and No Sales Tax?
While no state is truly free of both income and sales tax, some come close. Understand the tax trade-offs and find states with a lower overall burden.
State governments fund their services through taxes on residents and businesses. The two most prominent forms are state income tax and state sales tax. An income tax is a direct tax on the earnings of individuals and corporations, while a sales tax is an indirect tax applied to the price of goods and services sold within a state’s borders. The structure and rates of these taxes vary significantly between states.
The Shortlist of States
No state operates entirely without both a statewide personal income tax and a general sales tax. However, two states come closer than any others: Alaska and New Hampshire.
Alaska is known for not having a personal income tax, and it also does not levy a sales tax at the state level. This position is largely sustained by revenue from its natural resources, but it is not the complete picture. Municipalities and boroughs within Alaska have the authority to impose their own local sales taxes, with rates in some jurisdictions reaching as high as 9.5%.
New Hampshire has neither a general sales tax nor a broad-based personal income tax. Previously, the state taxed income from interest and dividends, but this tax was fully repealed as of 2025.
How These States Generate Revenue
States that forgo broad-based income or sales taxes must rely on other methods to fund government operations. For Alaska, the primary substitute is the severance tax, a tax imposed on the extraction of non-renewable natural resources. The state’s oil and natural gas reserves provide a revenue stream that offsets the need for a personal income tax.
In both Alaska and New Hampshire, property taxes represent a significant source of funding for local governments. These taxes are often higher than the national average to compensate for the absence of other major tax types. Both states also utilize more targeted excise taxes on specific products like gasoline, tobacco, and alcohol, along with corporate-level taxes, to round out their budgets.
Other Tax-Friendly States to Consider
For individuals focused on minimizing their tax burden, several other states offer attractive structures even if they don’t eliminate both major taxes. A number of states have chosen to operate without a personal income tax, which can be a financial benefit for residents. These states rely more heavily on other forms of taxation, such as sales or property taxes, to fund services. These states are:
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
A different group of states has opted to forgo a statewide sales tax. Besides New Hampshire, this group includes Delaware, Montana, and Oregon. These states typically make up for the lost revenue through higher income taxes or other levies.