ZIP Codes With No Tax: How to Identify Areas Without Sales Tax
Learn how to identify ZIP codes with no sales tax, understand regional differences, and verify tax boundaries for both online and in-person purchases.
Sales tax can add a significant cost to everyday purchases, but some areas in the U.S. do not impose this tax. Whether shopping online or in person, knowing which ZIP codes are tax-free can help you save money. However, identifying these locations isn’t always straightforward.
Understanding where sales tax applies requires more than just looking at a ZIP code. Tax policies vary by state, county, and even city, making it essential to verify specific rules before assuming an area is tax-free.
Criteria for ZIP Codes With No Sales Tax
ZIP codes without sales tax are primarily found in states that do not impose a statewide sales tax. As of 2024, these states include Alaska, Delaware, Montana, New Hampshire, and Oregon. However, local taxes may still apply in certain areas within these states.
Alaska is a unique case because, while the state does not collect sales tax, some local governments do. Anchorage and Fairbanks, for example, do not impose local sales taxes, but municipalities like Juneau (5%) and Wasilla (2.5%) do. This means not every ZIP code in Alaska is tax-free, requiring buyers to check local tax ordinances before making purchases.
Beyond these tax-free states, some ZIP codes in other states may also have exemptions. Military bases and Native American reservations often have special tax rules. Purchases made on federally recognized reservations may be exempt from state and local sales tax, depending on tribal agreements. Some states also create tax-free zones for economic development, where businesses receive exemptions on certain transactions.
Variation Between Counties and Municipalities
Sales tax laws are primarily set at the state level, but local jurisdictions can impose additional taxes, creating differences between neighboring areas. Even within the same state, one county may have no sales tax while an adjacent one does. This is common in home rule states, where local governments control taxation.
Colorado, for example, allows cities to levy their own sales taxes independently of the state rate. Denver (8.81%) has a different tax rate than Colorado Springs (8.2%), despite both being major cities in the state. Missouri also permits local taxing districts, such as transportation development districts and community improvement districts, which can add sales tax rates ranging from 0.25% to 1%.
Some municipalities forgo sales tax to attract businesses and consumers. This is especially common in regions bordering states with lower tax rates. Shoppers in Illinois often cross into Missouri for lower sales tax on high-ticket items. Conversely, some cities in Oregon, which has no statewide sales tax, have considered implementing local sales taxes to generate revenue, though such measures rarely pass due to public opposition.
Confirming Sales Tax Boundaries
Determining whether a location is truly exempt from sales tax requires more than just checking a ZIP code. Tax boundaries are drawn based on jurisdictional lines that do not always align with postal designations. A single ZIP code can span multiple tax zones, meaning one address may be subject to tax while another within the same code is not.
State revenue departments and local taxing authorities provide online databases and mapping tools to confirm tax rates. The Texas Comptroller’s website, for example, offers a sales tax rate locator where users can enter an exact address to determine the correct tax jurisdiction. Similarly, California’s Department of Tax and Fee Administration provides a GIS-based sales tax lookup tool that accounts for district-level tax variations.
Retailers and online marketplaces also use geolocation technology to determine tax rates at the point of sale. Automated tax software, such as Avalara and TaxJar, integrates with e-commerce platforms to apply the correct tax rate based on precise address data rather than general ZIP codes. This is particularly important in states with destination-based sourcing rules, where sales tax is determined by the buyer’s location rather than the seller’s.
Differences in Online vs In-Person Purchases
The method of purchase affects how sales tax is applied. Physical retailers must collect sales tax based on the store’s location, meaning shoppers visiting a brick-and-mortar business in a taxable jurisdiction will generally pay the local rate at checkout.
Online purchases follow different tax collection rules, primarily due to the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., which allowed states to require remote sellers to collect sales tax even without a physical presence.
Since this ruling, most states have enacted economic nexus laws, requiring online retailers to collect tax if their sales exceed a specified threshold. California, for example, mandates tax collection for out-of-state sellers generating more than $500,000 in gross revenue from California customers. Texas enforces collection once annual in-state sales surpass $500,000. These thresholds vary by state, meaning a retailer may be required to collect tax in one jurisdiction but not another.