Sales tax policies vary widely across the United States, with some states and localities imposing no sales tax at all. For online retailers and shoppers looking to avoid paying sales tax, understanding which zip codes fall into no-tax jurisdictions can be extremely useful.
In this comprehensive guide, we will explore zip codes across the U.S. that have no sales tax. We’ll look at the key factors that allow certain areas to forego collecting sales tax, do a deep dive on some of the most notable no-sales-tax zip codes, and provide tips and strategies for retailers and shoppers looking to leverage no-tax zip codes.
Whether you are an ecommerce business owner, online seller, or everyday shopper, this guide will equip you with valuable insights on zip codes with no sales tax.
Notable Zip Codes With No Sales Tax
Below we dig deeper into some of the most notable zip codes across the U.S. that currently have no sales tax:
97330 – Corvallis, Oregon
All zip codes in Oregon have no sales tax since the state has no statewide sales tax. Corvallis, home to Oregon State University, is the county seat of Benton County. While restaurants may add a local “meals tax,” regular retail sales are free of any taxes in this zip code.
03222 – New Hampshire, Bristol
As another state with no sales tax, any New Hampshire zip code offers tax-free shopping. The small town of Bristol is located along the Pemigewasset River and features a historic downtown district. The 03222 zip code covers the center of town.
97222 – Milwaukie, Oregon
Located just south of Portland on the Willamette River, Milwaukie is a suburb in Clackamas County, Oregon. With Oregon having no sales tax, online retailers shipping to 97222 do not need to collect any taxes. This makes it an attractive tax-free destination.
97116 – Forest Grove, Oregon
Forest Grove is a city in Washington County, Oregon, about 25 miles from Portland. Home to Pacific University, it features a vibrant downtown district. As part of Oregon, its 97116 zip code is exempt from sales tax.
97080 – Portland, Oregon
Portland is the largest city in Oregon and one of the most significant no sales tax cities. The 97080 zip code covers downtown Portland, centered around the Willamette River. Popular shopping districts like the Pearl District and Old Town offer tax-free shopping.
99501 – Rainbow, Alaska
As an unincorporated CDP in Alaska, Rainbow has no sales tax under Alaska state law. Located northwest of Anchorage, its 99501 zip code covers some magnificent wilderness areas. Purchases shipped here avoid sales tax.
19810 – Dartmouth Woods, Delaware
Delaware is another state with no sales tax, making the 19810 zip near Wilmington tax-free. Dartmouth Woods is an affluent bedroom community featuring many upscale homes. Retailers shipping here can sell tax-free.
59001 – Absarokee, Montana
Absarokee is a small unincorporated town in south-central Montana, in Stillwater County. As Montana has no state sales tax, its 59001 zip code is exempt from taxes. Absarokee offers rural mountain living without sales tax.
Read More: Reverse Sales Tax Calculator: Rates Across the USA and Laws
Key Factors That Allow No Sales Tax Zip Codes
Several key factors come into play that allow certain zip codes to have no sales tax:
States With No Sales Tax
Five U.S. states forego collecting any statewide sales tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Therefore, all zip codes within these states automatically have no sales tax. However, some cities and municipalities within these states may still impose local sales taxes.
Tax-Free Shopping Holidays
Some states offer temporary “tax holidays” where sales tax is suspended for a defined holiday period, usually a weekend or week. For example, Florida has a tax-free back-to-school shopping period in August.
While retailers still need to collect sales tax during the rest of the year, shoppers can save on taxes during the tax holiday.
Tax Incentives for Businesses
Some states and localities create special tax incentives to attract new businesses and encourage economic growth. For example, Nevada created tax abatements to incentivize Tesla to build its Gigafactory there.
Areas with tax incentives aimed at business growth sometimes suspend sales tax collection for certain zip codes or districts.
Remote Sellers Not Required to Collect Tax
In the past, online and remote sellers were not required to collect sales tax unless they had a physical presence in the buyer’s state. This allowed many internet retailers to sell tax-free into certain zip codes.
However, recent changes to tax laws are now requiring more remote sellers to collect state sales tax regardless of physical presence. Still, enforcement remains challenging.
Native American Reservations
Native American reservations have sovereignty over their land and often do not collect state sales taxes. Instead, they may collect their own tribal sales taxes. This allows retailers on reservations to sell tax-free to non-tribal members.
Read More: Extended Warranty Service Sales Tax Across the USA
Tips for Online Sellers with No Sales Tax Zip Codes
For ecommerce businesses, leveraging no sales tax zip codes strategically can provide advantages. Here are some tips:
- Focus marketing and advertising efforts on states and zip codes with no sales tax to attract more tax-free sales.
- Offer free shipping promotions exclusively to no-tax zip code customers to increase order values.
- Highlight tax-free status prominently in product listings and descriptions for applicable zip codes.
- Consider situating warehouses and fulfillment centers in states with no sales tax to simplify tax compliance.
- Consult a tax professional to ensure proper compliance for any tax-free zip code orders. Requirements vary by state.
- Ensure website clearly communicates sales tax policies and exemptions to avoid customer confusion at checkout.
- Consider limiting product selection for no-tax zip code customers if margins are slimmer without tax.
Read More: What are the Sales Tax Rates on Buffalo Across the USA?
Shopping Strategies for Zip Codes With No Sales Tax
Savvy shoppers can also take advantage of zip codes with no sales tax in various ways:
- If possible, have larger purchases shipped to a no-sales-tax zip code to avoid tax. For example, when remodeling a vacation home.
- For big online purchases, calculate total taxes and compare to cost of temporary freight forwarding service to a no-tax zip.
- Plan shopping activity requiring large purchases around visits to no-sales-tax states and zip codes.
- For frequent online shoppers, consider pros and cons of moving to a no-sales-tax state. Weigh tax savings versus other costs like real estate.
- On websites, select zip code at checkout strategically to avoid sales tax if permitted. Requires addresses in multiple states.
- Follow state tax holidays closely and do major shopping during the exempt periods.
- Check rules around claiming reimbursement for sales tax paid if required for business purposes. Requirements vary.
Read More: Do You Add Sales Tax on Labor Across the USA? A Statewide Guide
The Future of Sales Tax on Online Purchases
Recent years have seen major changes in how states can collect sales tax on online and remote purchases:
- In 2018, the Supreme Court ruled in South Dakota v. Wayfair Inc that states can require tax collection even without a physical presence. This overturned previous protections for retailers without in-state presence.
- By January 2023, over 40 states had adopted economic nexus laws requiring out-of-state sellers to collect sales tax based on sales volumes or transactions in the state, regardless of physical presence.
- Still, enforcement of new economic nexus laws remains challenging. States are banned from requiring shoppers to pay uncollected tax.
- Future proposals could allow single nationwide tax collection by simplifying rates and rules. This would impact many existing no-tax zip code exemptions.
- Pending federal proposals also seek to increase collection requirements for online marketplaces and platforms. This could significantly reduce online tax loopholes.
Read More: How Much Does the USA Government Make From Sales Tax?
Conclusion
Zip codes with no sales tax offer notable benefits for both online businesses and everyday shoppers. Key factors like statewide exemptions, incentives, holidays, and limitations around out-of-state seller collection have allowed qualifying zip codes to remain tax-free.
However, recent changes are rapidly impacting online sales tax collection requirements in many states. While zip codes with no sales tax still exist, retailers and shoppers should stay up-to-date on evolving rules and laws in this complex area. With proper planning, no sales tax zip codes can be leveraged to create significant savings.
Frequently Asked Questions
Can I use a zip code with no sales tax on the Nintendo eShop?
Yes, you can enter a zip code from a state with no sales tax during checkout on the Nintendo eShop to avoid paying sales tax on your purchase. Some zip codes to use include 97330 in Oregon or 03222 in New Hampshire. However, Nintendo may attempt to collect appropriate tax later based on your account location.
What zip code should I use for tax-free purchases on the Nintendo eShop?
Some recommended zip codes to enter at checkout for tax-free purchases on the Nintendo eShop are 97116 in Oregon, 99501 in Alaska, or 59001 in Montana. Using a zip code from a state with no sales tax like Oregon, Alaska, or Montana can help you avoid sales tax on the eShop. Be aware that Nintendo’s terms prohibit avoiding appropriate sales tax.
Why do some zip codes have no sales tax?
Some zip codes have no sales tax primarily because they are located in states that do not collect statewide sales tax, like Oregon and New Hampshire. Other contributing factors include tax incentives for businesses, Native American reservations exempt from state taxes, and limitations around requiring remote sellers to collect tax prior to recent law changes.
Can I avoid sales tax by having items shipped to a zip code with no sales tax?
In some cases, yes. For very large purchases, it may be worthwhile to have items shipped to a friend or freight forwarder in a no-sales-tax zip code. However, retailers are increasingly required to collect tax based on the buyer’s location and residency rather than shipment destination.
How do retailers benefit from no sales tax zip codes?
Online sellers marketing to no-sales-tax zip codes can offer lower prices without needing to build in sales tax costs. Fulfillment centers located in tax-free states can also simplify compliance. No sales tax is also a selling point to advertise.
Can states require me to pay sales tax if the retailer did not collect it?
In most states, if a retailer fails to collect required sales tax on a purchase, the buyer is not responsible for paying that tax directly. However, buyers may still need to claim out-of-state online purchases when filing state tax returns.
Are there disadvantages to living in a state with no sales tax?
While paying zero sales tax may seem appealing, states often offset the lack of sales tax revenue with higher income taxes or other taxes and fees. There may also be limitations around deductions and exemptions. Considering the overall tax burden is important.
