The NOMAD States: Which US States Have No Sales Tax?

NOMAD states—New Hampshire, Oregon, Montana, Alaska, and Delaware—do not impose a statewide sales tax. This lack of sales tax can lead to lower prices for goods and simpler tax compliance. In this article we explore the characteristics, benefits, and potential trade-offs of these no-sales-tax states.

Key takeaways

• No statewide sales tax: The NOMAD states—New Hampshire, Oregon, Montana, Alaska, and Delaware—do not impose a statewide sales tax, making them attractive for certain businesses and consumers.
  
  
• Other taxes still apply: While sales tax is absent, businesses may still face local taxes, corporate taxes, or other state-specific tax obligations.
  
  
• Nexus rules matter: Even businesses in NOMAD states must collect sales tax in other states if they exceed economic nexus thresholds.

What are the NOMAD states?

The NOMAD acronym represents the five states with no statewide sales tax:

• New Hampshire
• Oregon
• Montana
• Alaska
• Delaware

Each of these states has unique tax structures, but the absence of a statewide sales tax can make them attractive to businesses looking to reduce their tax compliance burden. However, businesses must still understand how local sales taxes, sales tax laws, and economic nexus rules affect their ability to sell across state lines, not to mention the impact of other business taxes.

A closer look at the NOMAD states

New Hampshire – No sales tax, but other business taxes apply

• New Hampshire has no sales tax at either the state or local level.
• Businesses must comply with the state's tax laws, however, which include the Business Profits Tax (BPT) and Business Enterprise Tax (BET).
• The state also has an 8.5% tax on meals and room rentals, known as the Meals and Rooms tax.

Oregon – A haven for tax-free shopping

• Oregon has no state sales tax and does not allow local sales taxes.
• This makes Oregon a prime location for businesses that sell high-ticket items, as consumers often travel to the state to make tax-free purchases.
• Businesses operating in Oregon may still face other tax obligations, such as the Corporate Activity Tax (CAT), which applies to companies exceeding a certain revenue threshold.

Montana – No statewide sales tax, but some local taxes

• Montana does not impose a state sales tax, making it attractive for both residents and businesses.
• However, certain resort towns (such as Big Sky and West Yellowstone) charge local sales taxes on lodging, restaurants, and other services.
• Businesses must still comply with federal and corporate tax laws and regulations.

Alaska – No statewide sales tax, but some local sales taxes apply

• Alaska does not have a statewide sales tax, but many local jurisdictions charge their own local sales taxes.
• Businesses selling in Alaska must track local taxes to ensure they properly collect sales tax in municipalities where it is required.
• The state generates much of its revenue from oil and natural resources instead of traditional taxation.

Delaware – No sales tax, popular for incorporation

• Delaware has no state sales tax, making it a preferred destination for business incorporation.
• Many large corporations, including Fortune 500 companies, are incorporated in Delaware due to its favorable tax laws and business-friendly legal environment.
• Instead of a sales tax rate, Delaware imposes other business taxes, such as the Gross Receipts Tax.

Why some states choose not to impose a sales tax

Some states choose to have no sales tax as a part of their economic strategy. By not imposing a statewide sales tax, these states aim to boost economic growth by attracting both businesses and consumers. The absence of a sales tax can make these states more appealing for shopping and business operations, potentially leading to increased economic activity.

These states often rely on alternative revenue sources, such as higher income taxes, to compensate for the lack of sales tax revenue. This can include relying more heavily on income tax or other funding methods to support public services and infrastructure. Understanding the rationale behind these decisions offers valuable insights into the broader economic strategies of these states.

Pros and cons of no sales tax states for businesses

Operating a business in a no sales tax state has both advantages and disadvantages:

Pros 

• Lower compliance costs – No need to collect, file, or remit sales tax, reducing administrative burdens.
• Competitive pricing – Businesses can offer lower final prices, attracting more customers.
• Fewer tax audits – No sales tax means no risk of sales tax audits or penalties.

Cons

• Higher business taxes elsewhere – The state may compensate with higher corporate, property, or income taxes.
• E-commerce tax compliance still applies – Businesses selling online must still collect sales tax in states where they have economic nexus.
• Limited public services – Lower state tax revenue may result in fewer infrastructure and business support programs.

The nexus challenge – What businesses need to know

Even if a business is based in a no sales tax state, it may still need to collect sales tax when selling to customers in other states. Economic nexus laws require businesses to remit sales tax if they exceed a specific revenue or transaction threshold in a particular state. There may also be local sales taxes to consider, as is the case in Alaska. 

For example:

• A company based in Oregon that sells online to customers in California must begin to collect sales tax in California once it surpasses the sales tax rate threshold ($100,000 in sales or 200 transactions).
• Alaska-based businesses must track local sales taxes, as different municipalities impose their own rates.

Tips for staying sales tax compliant

• If your business sells outside a NOMAD state, review each state's sales tax laws to determine your tax obligations.
• Many states use economic nexus laws to require out-of-state businesses to remit sales tax once they reach a certain revenue or transaction level.
• Consider tax compliance software to automate sales tax calculations and reporting.

What does the future hold for the NOMAD states?

While the NOMAD states have long maintained no state sales tax, potential changes are emerging. Alaska is moving toward a more unified tax system with expanded local sales taxes and economic nexus rules. Montana is debating a statewide sales tax to boost revenue, though historical opposition remains strong. Delaware is introducing a 15% marijuana sales tax, signaling a shift in its tax strategy. 

Businesses should stay informed as these changes could impact sales tax compliance, tax obligations, and remit sales tax requirements.

Conclusion

Understanding the tax landscape of the NOMAD states—New Hampshire, Oregon, Montana, Alaska, and Delaware—can offer significant advantages for businesses. These states’ lack of a statewide sales tax can simplify business operations and reduce costs. However, other taxes such as income, corporate, and local sales taxes must be considered.

Businesses must navigate the complexities of tax compliance, including understanding sales tax nexus and registering for sales tax permits in other states. Proper documentation is crucial for avoiding costly audits and ensuring compliance.

By leveraging the unique tax policies of NOMAD states, businesses can maximize their economic opportunities. Staying informed and compliant with tax laws can lead to significant tax savings and a more streamlined financial operation.

Do you need help with your sales tax compliance? Book a free call with one of our sales tax experts to find bespoke solutions for your business, optimize your tax costs, and reach millions of new potential customers. 

Frequently Asked Questions

What are the NOMAD states?

The NOMAD states—New Hampshire, Oregon, Montana, Alaska, and Delaware—are the five U.S. states that do not impose a statewide sales tax.

Do any of the NOMAD states have local sales taxes?

Yes, Alaska and Montana allow certain local jurisdictions to impose sales taxes, particularly in resort or high-tourism areas. The other three states—New Hampshire, Oregon, and Delaware—do not have local sales taxes.

If my business is in a NOMAD state, do I still have to collect sales tax?

Possibly. If you sell to customers in other states, you may have to collect and remit sales tax based on economic nexus laws, which apply once sales surpass a certain revenue or transaction threshold in a given state.

Are there other business taxes in the NOMAD states?

Yes, while these states don’t impose state sales tax, they may have other business taxes. For example, Delaware has a Gross Receipts Tax, Oregon has a Corporate Activity Tax, and New Hampshire has business profits and enterprise taxes.

Could any of the NOMAD states introduce a sales tax in the future?

It's possible. Some NOMAD states, like Montana and Alaska, have debated introducing or expanding sales tax policies to increase revenue, but strong historical opposition makes major changes uncertain.