Sales Tax-Free States? Inside the NOMAD Tax System

It is no novelty to say that the US has one of the most complex systems of indirect taxation in the world, with 45 of the 50 states imposing general sales and use taxes at varying rates and with varying applicability rules. However, this overview emphasizes the unique tax environment of NOMAD states, which do not impose a statewide sales tax. 

These NOMAD states represent a distinctive tax environment for consumers and businesses alike. Nonetheless, even without sales and use taxes, it is necessary to understand the taxability rules in these states, how they operate without a sales tax, and the alternative tax structures that sustain public revenues.

NOMAD States: No Statewide Sales Tax

NOMAD stands for New Hampshire, Oregon, Montana, Alaska, and Delaware, and these states share a single defining trait: they do not impose a statewide sales tax on general consumer purchases. In contrast to the majority of US states, where consumers typically pay sales tax at the point of purchase and sellers are tasked with collection and remittance, or where consumers are liable for use tax if the sellers do not collect sales tax, the NOMAD states have elected not to adopt this broad-based consumption tax.

Why Do NOMAD States Not Impose Sales Tax?

The decision not to impose a statewide sales and use tax on the sale of goods and services is primarily made on economic and policy grounds. The primary reasons are a historical preference for lower tax burdens, a desire to stimulate cross-border retail activity, or a deliberate strategy to emphasize other tax bases, such as income, property, or business activity taxes. For example, Alaska's budget heavily relies on oil revenue, allowing policymakers to avoid imposing broad-based consumption taxes.

Additionally, the absence of sales and use tax in NOMAD states influences business and consumer behavior, as consumers from neighboring states often travel to make large purchases, especially of high-ticket items, due to lower final prices. This dynamic adds complexity to US sales tax compliance for businesses and remote sellers, emphasizing the importance of understanding nexus and use tax rules.

Taxes in States With No Sales Tax

It is essential to note that the absence of a statewide sales and use tax does not mean that NOMAD states lack taxes. Instead, each has developed alternative tax systems, such as excise duties, corporate taxes, and local sales taxes, which are crucial for supporting government services and shaping the broader tax landscape.

New Hampshire: Meals and Rentals Tax

While New Hampshire does not impose a sales tax on most goods and services, it does impose a Meals and Rental tax on specific categories of consumption, such as prepared food and beverage sales in restaurants and short-term room rentals. This tax, currently set at 8.5%, targets discretionary spending without adopting a comprehensive sales tax.

Given its narrow scope of application, the tax serves a dual purpose. On one side, it generates revenue from sectors that benefit from tourism and hospitality, while at the same time preserving the broader tax-free retail environment.

Oregon: Vehicle Taxes

In 2018, Oregon implemented a Vehicle Privilege Tax, imposed on car dealers for the privilege of selling vehicles in Oregon. Simultaneously, Oregon introduced the Vehicle Use Tax, which applies to vehicles purchased from dealers outside Oregon that must be registered and titled in the state. These two taxes are commonly referred to as Vehicle Taxes, calculated at a rate of 0.5% of the retail sales price of any taxable vehicle.

Notably, the retail sales price includes the total amount paid for a vehicle as it was equipped by the manufacturer, including any separately stated dealer preparation such as clear-coating or rustproofing, transportation or delivery fees, and charges for accessories, parts, or other aftermarket products. However, any separately stated discounts or rebates that reduce the vehicle’s price at the time of sale are subtracted from the total.

Montana: Business Taxes

Montana has a wide range of business taxes, which include taxes on specific goods or activities, such as Alcoholic Beverage Taxes, Tobacco and Nicotine Taxes, and specific other types of taxes, such as Contractor's Gross Receipts Tax, Lodging Facility Sales and Use Tax, Retail Telecommunications Excise Tax, and Rental Vehicle Tax.

Among all Business Taxes, the Lodging Facility Sales and Use Tax, imposed on lodging accommodations, including hotels, motels, camping sites, resorts, hostels, bed-and-breakfasts (B&Bs), home vacation rentals, online hosting platforms, and short-term rental marketplaces, stands out as the most similar to traditional sales and use tax. This resort tax on lodging or tourism-related services is set at a combined 8%, consisting of 4% use tax and 4% sales tax. Additionally, some local municipalities also impose a 3% Local Resort Tax.

Alaska: Local Sales and Use Tax

Alaska’s tax system is often perceived as among the most unusual in the US because it has neither a statewide sales tax nor a personal income tax. Still, local governments have broad authority to impose local sales and use taxes. As a result, more than 100 municipalities impose their own local sales taxes, with rates varying widely depending on location.

For example, Anchorage, Juneau, and Fairbanks may each have distinct sales tax rates, and some coastal or tourism-oriented cities and boroughs apply higher rates during peak seasons. This patchwork of local sales taxes creates complexity for businesses operating in multiple jurisdictions, as they must track and comply with differing local tax rules. In other words, Alaska is a perfect example that no state sales tax does not equate to a tax-free environment for all transactions.

Delaware: Gross Receipts Tax

Delaware completes the NOMAD puzzle. What separates Delaware from other NOMAD states is its distinctive approaches. Instead of sales and use taxes, Delaware imposed a Gross Receipts Tax on businesses that sell goods or provide services within the state. In practice, depending on the taxable person's business activity, the 0.0945% to 1.9914% Gross Receipts Tax rates apply to the total revenue from goods sold and services provided within the state.

Although a Gross Receipts Tax is not a typical sales tax, it can influence pricing and business decisions because it effectively increases the cost base for sellers. Consequently, consumers may indirectly pay the price of this tax through higher prices, even as they enjoy the absence of a direct sales tax at checkout.

Sales Tax in NOMAD States: Emerging Changes and Predictions

Even though NOMAD states have traditionally had no state sales tax, some changes are on the horizon. By establishing the Alaska Remote Seller Sales Tax Commission, Alaska is working toward a more unified tax system, expanding local sales taxes, and implementing economic nexus rules. Montana is considering a statewide sales tax to increase revenue, despite persistent historical opposition. In August 2025, Delaware introduced a 15% Retail Marijuana Tax, indicating a potential shift in its overall tax approach.

Conclusion

The NOMAD states offer a compelling variation on the US tax system: no statewide sales tax, yet no complete absence of tax liabilities. With each state targeting different supplies, these taxes reflect tailored approaches to balancing low consumption taxation with revenue needs. For businesses and professionals, the complexity lies in understanding the mosaic of alternative tax bases and compliance obligations. Moreover, the sales tax policies of the NOMAD states remain an insightful study in divergent fiscal policymaking.

Source: VATabout - US - New Hampshire Meals and Rentals Tax Guide, VATabout - Oregon Vehicle Privilege & Use Tax Guide, VATabout - US - Alaska Sales and Use Tax Guide, VATabout - Delaware Gross Receipts Tax, VATabout - Montana Business Taxes Explained