If you are thinking about moving to one of the lowest sales tax states in the U.S. to save money, you might want to reconsider. That's because a state’s sales tax rate doesn't always reflect how much tax you will actually pay. And, if the price of products and services is higher, to begin with, you could wind up losing money.
Also, keep in mind that localities (cities and counties) in some states can add sales tax separate from the statewide tax rate. So, rankings for states with the lowest sales tax are based on the average combined local and state tax rates.
Note: The sales tax rates used in this story are based on data from the Tax Foundation (opens in new tab) and are accurate as of January 2023. This list does not include the four reported states with no sales tax or average combined local taxes.
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Lowest Sales Tax States in the U.S.
10. Idaho Sales Tax
State sales tax: 6%
Average local sales tax: 0.02%
Average combined sales tax: 6.02%
Some cities in Idaho charge a local sales tax that consumers must pay in addition to the state sales tax in Idaho. The local sales tax rate in Sun Valley is 3%, meaning residents in this area pay a sales tax rate of 9%. Thankfully, there are plenty of areas in Idaho that don't charge a local sales tax at all.
Other good things to know about Idaho sales tax:
- You will need to pay sales tax on groceries, but the state has a grocery credit that you can claim on your tax return. This credit averages $100.
- Prescription drugs are taxable.
- Clothing and motor vehicle purchases are taxable.
9. Maryland Sales Tax
State sales tax: 6%
Average local sales tax: 0%
Average combined sales tax: 6%
One nice thing about tax in Maryland is that you can travel anywhere in the state and not worry about paying a different sales tax rate. It’s 6% everywhere since counties and cities do not levy their own taxes. Your groceries and prescription drugs aren’t taxable, but you’ll need to pay the 6% tax on clothing and motor vehicle purchases.
Other good things to know about Maryland sales tax:
- Alcoholic beverages are taxed at 9%.
- Vacationers could face higher sales taxes since short-term rental cars are taxed at 11.5%.
8. Kentucky Sales tax
State sales tax: 6%
Average local sales tax: 0%
Average combined sales tax: 6%
With a 6% average combined sales tax rate, Kentucky state sales tax ties with two other states on this list. You won’t need to pay any sales tax on groceries or prescription drugs. You will pay sales tax in Kentucky when you make motor vehicle and clothing purchases, but that is the case for most states in the US.
Other good things to know about Kentucky sales tax:
- In January 2023, 30 new categories became subject to sales tax. These include jewlery repair, private investigating, and even parking.
- On the bright side, Kentucky income tax was slashed from 5% to 4.5% when the new taxable categories were added.
7. Michigan Sales Tax
State sales tax: 6%
Average local sales tax: 0%
Average combined sales tax: 6%
Michigan is another state with a 6% sales tax rate. The Michigan sales tax is lower for some home energy necessities, like electricity, natural gas, and home heating oil, which are taxed at 4% for residential customers.
Other good things to know about Michigan sales tax:
- Sales tax in Michigan was first established in 1933 at a rate of 3%.
- The tax rate has remained at 6% since 1994.
- Groceries and prescription drugs are exempt.
- Clothing and motor vehicle purchases are taxable.
6. Virginia Sales Tax
State sales tax: 5.3%
Average local sales tax: 0.45%
Average combined sales tax: 5.75%
Counties and cities in Virginia can impose their own sales taxes. Still, the average combined Virginia sales tax rate remains under 6%. However, you could pay a 7% sales rate if you shop in some areas of James City County. When it comes to motor vehicles, tax in Virginia isn’t the most affordable since you’ll need to pay sales tax and Virginia personal property tax too.
Other good things to know about Virginia sales tax:
- Food and personal hygiene products (including diapers) are taxable but at a reduced rate of 1%.
- Prescriptions are tax exempt.
- There is no sales tax on over the counter medication.
- You'll need to pay Virginia sales tax on clothing.
5. Maine Sales Tax
State sales tax: 5.5%
Average local sales tax: 0%
Average combined tax: 5.5%
Grocery staples are tax exempt in Maine, but the state doesn’t include some healthy snacks like seeds or dried fruit as staples, so you’ll need to pay Maine sales tax on those. And even though there isn’t tax in Maine on most fruits, there is a tax on wild blueberries. Wild blueberries processed in the state come with a tax rate of 1 ½ cents per pound.
Other good things to know about Maine sales tax:
- Motor vehicle and clothing purchases are taxable.
- Prepared food is taxed at an 8% rate.
- There is a 10% tax on short-term rental vehicles.
- Prescription medications are tax exempt.
4. Wisconsin Sales Tax
State sales tax: 5%
Average local sales tax: 0.43%
Average combined sales tax: 5.43%
Prescription drugs are tax exempt. You won’t need to pay Wisconsin sales tax on groceries either. Wisconsin put an end to sales tax on groceries in July of 2006. Wisconsin hasn’t repealed its tax on motor vehicles or clothing though, so you’ll still pay state and local tax in Wisconsin on these purchases.
Other good things to know about Wisconsin sales tax:
- Taxes are higher in the Wisconsin Dells area at a rate of 6.75%.
- You could pay up to a 12.25% tax on lodging.
3. Wyoming Sales Tax
State sales tax: 4%
Average local sales tax: 1.36%
Average combined sales taxes: 5.36
Sales tax in Wyoming was first adopted in 1935 as a temporary measure, but it became permanent in 1937. It’s now at 4%, but cities and counties can set tax rates of up to 2%. Teton Village has a minimum 6% tax rate, but it also features a below average crime rate and low cost of living.
Other good things to know about Wyoming sales tax:
- Groceries and prescriptions are tax exempt.
- Clothing is taxable.
- Motor vehicles are taxable.
- If a tax jurisdiction imposes a 2% tax rate, 1% must be used for an allocated project, such as construction or other improvements.
2. Hawaii Sales Tax
State sales tax: 4%
Average local sales tax: 0.44
Average combined sales tax: 4.44%
Hawaii has a complex sales tax system with many different levels (county, city, transportation and special purpose districts). Sales tax in Hawaii is passed on to consumers in the final price of products. Businesses often charge a 4.712% rate, even though the tax is 4.5% in most areas. This ensures they don’t lose money since the tax is based on their gross receipts. There is some more disappointing news. You’ll need to pay tax on groceries, which already cost more than the national average.
Other good things to know about Hawaii:
- Prescription drugs are not taxable.
- You still need to pay tax on over the counter medications.
- Clothing and motor vehicle purchases are taxable.
- If you visit Honolulu, you’ll pay a 4.5% tax rate (higher than the combined average for the state).
1. Alaska Sales Tax
State sales tax: 0%
Average local sales tax: 1.76%
Average combined sales tax: 1.76%
There is currently no state sales tax in Alaska, but there are proposals for a 2% statewide tax. However, even if passed, Alaska would still take first place for the average combined sales tax (not including those with no state or local taxes). And while some areas do charge local sales tax, you won’t find any in Anchorage.
Other good things to know about Alaska sales tax:
- Juneau has a 5% sales tax rate, which is higher than the average for Hawaii.
- There is no longer a maximum local sales tax, meaning jurisdictions can charge any amount they’d like (as long as it is approved by a majority vote).
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