As of 2017, 29.6 million small businesses represented 99.9 percent of all United States businesses. They employed 57.9 million individuals, which broke down to 47.8 percent of all United States employees.
The United States is run by small businesses. So how does the sales tax that they charge you affect your life? Well, states with no sales tax do exist. Here are the five states that have no sales tax as well as our recommendations for if you’re considering moving to one.
States With No Sales Tax
There are five total states with no sales tax. These states are known as the NOMAD states; New Hampshire, Oregon, Montana, Alaska, and Delaware.
New Hampshire
While there are no sales taxes in New Hampshire, the property tax throughout the state is cited as the second or third highest in the country. If you own and operate a business in New Hampshire, you will pay a government tax directly, known as the Business Profits Tax.
Oregon
Oregon has no sales taxes, but the state’s property tax is 3.6 percent, the 18th highest through the United States. Oregon also has an E911 fee that applies a tax to any device that can call 911.
Montana
While Montana does not have an official sales tax, it does have lodging and facilities sales and use tax. The state also makes most of its revenue through natural resource taxes.
Alaska
Alaska is an odd case. While it does not have a state-wide sales tax, local municipalities can implement their own sales taxes. This makes Alaska oftentimes a de facto sales tax state.
While many of these taxes are relatively low, Alaska also has many miscellaneous types of taxes on alcohol, raw fish, and tobacco among others.
Delaware
Delaware does not have sales taxes but has an E911 fee similar to Oregon. Small businesses are also required to pay a gross receipt tax.
Sales Tax vs. Income Tax
So how do sales taxes compare to income taxes? PayStubs.net goes into detail about no-income-tax states. While moving to a no-income-tax state might be worth it for those with extremely high salaries, states usually have to make up for the lack of income through other taxes. These include sales and property taxes.
No-sales tax states can work the same way. New Hampshire is one of our states with no sales tax, but it has some of the highest real estate taxes in the United States.
Should You Move to a No-Sales Tax State?
So is moving to states with no sales tax a smart move? It depends on your situation. If you are a retail business owner, there may be more appeal in operating your business in a no-sales tax state. This can allow you to charge lower rates and anger fewer customers who may be unaware of your state’s high sales tax rates.
However, you’ll have to keep in mind that your property taxes will probably be higher in return. If you’re not a business owner, consider no-income tax states instead, where higher salaries may make higher other taxes worth it.
