How to do Business from a No Sales Tax (NOMAD) States

Published on:

June 6, 2025

What Are NOMAD States and Why Do They Have No Sales Tax?

NOMAD states - New Hampshire, Oregon, Montana, Alaska, and Delaware, are the only five U.S. states that don’t levy a statewide sales tax.

Each state has its own reason for avoiding this tax:

New Hampshire and Delaware have long positioned themselves as low-tax environments to attract businesses and shoppers from neighboring states.
Oregon relies more heavily on income taxes.
Montana depends on natural resource revenues and other fees.
Alaska draws a large portion of its revenue from oil and gas, allowing it to operate without a state-level sales tax.

Instead of taxing consumption, these states fund public services through other sources like income taxes, corporate taxes, property taxes, or natural resource royalties. The result is a business environment with fewer transaction-level tax obligations but not necessarily lower taxes overall.

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Do Any NOMAD States Have Local Sales Taxes?

While the NOMAD states don’t impose a statewide sales tax, that doesn’t mean you’re entirely off the hook. Two of them, Alaska and Montana, allow local jurisdictions to impose their own sales taxes. This creates a patchwork of tax rules you need to understand:-

Alaska: Local Sales Taxes Are Common

Alaska doesn’t have a state-administered sales tax, but more than 100 local governments impose their own. These taxes can range from 1% to 7%, depending on the city or borough. For example:

Juneau has a 5% sales tax.
Wasilla charges 2.5%.
Ketchikan imposes up to 7%.

These local taxes apply to in-person retail sales and services delivered locally. If you’re operating a storefront or physical presence in Alaska, you’ll need to register and comply with the tax requirements of the specific locality, not the state.

Montana: Sales Tax in Tourist Hotspots

Montana generally does not allow local sales tax, but there’s an exception for resort communities. Towns like Whitefish, Red Lodge, and Big Sky levy local “resort” taxes, typically in the 2%–4% range. These are designed to generate revenue from tourists rather than residents and are often applied to lodging, restaurants, and luxury goods.

What About the Other NOMAD States?

These three states including New Hampshire, Oregon, and Delaware take a stricter stance - no state or local sales taxes of any kind. If you operate entirely within one of these states, you won’t need to worry about collecting sales tax from in-state customers at all.

Why This Matters for Businesses

Even if you register your business in a no-sales-tax state, your physical locations or even temporary operations like pop-up shops could trigger local sales tax obligations. These taxes are enforced by city or borough authorities, not the state, but they still require registration, collection, and timely filing.

Note - Being in a NOMAD state doesn’t automatically mean “no sales tax” across the board. If you’re serving local customers in Alaska or Montana, do your homework on local tax ordinances.

Why Some States Choose to Avoid Sales Tax Altogether

Choosing not to impose a statewide sales is a deliberate policy decision aimed at shaping a state’s economic model and business environment.

Here’s why some states avoid sales tax:

1. Attracting Shoppers and Businesses

States like New Hampshire and Delaware use their no-sales-tax status as a draw. For residents of nearby high-tax states, crossing the border to shop becomes common. This creates an influx of retail activity, even without collecting sales tax.

For businesses, the benefit is clear: fewer administrative burdens, more pricing flexibility, and a cleaner experience for customers.

2. Shifting the Revenue Mix

Instead of taxing consumption, NOMAD states rely on:

Personal income taxes (e.g., Oregon)
Corporate income or franchise taxes (e.g., Delaware)
Gross receipts or activity taxes (e.g., New Hampshire, Oregon)
Natural resource revenues (e.g., Alaska’s oil royalties)

This shifts the tax burden away from transactions and toward income, business activity, or resource extraction.

3. Competitive Tax Positioning

Some NOMAD states position themselves as low-friction jurisdictions to appeal to founders, remote workers, and investors. For example:

Delaware is a go-to destination for incorporation, thanks in part to its low tax friction and business-friendly courts.
Oregon promotes itself as a good location for businesses that operate on slim margins, since sales tax doesn’t eat into pricing.

What Do These States Give Up by Skipping Sales Tax?

There’s a reason most states choose to collect sales tax - it’s a reliable and broad-based revenue source. By opting out, NOMAD states trade short-term ease for longer-term financial challenges.

Here’s what they give up and how they compensate:

Revenue for public services: Without sales tax, states may have less to spend on infrastructure, education, and healthcare unless they make it up elsewhere.
Dependence on other taxes: Many NOMAD states rely more heavily on income, business, or property taxes. For example, New Hampshire has both a Business Profits Tax and a Business Enterprise Tax.
Volatile income sources: Alaska’s dependence on oil revenue means its budget is vulnerable to swings in commodity prices. This creates uncertainty in public funding.

Note: No sales tax doesn’t mean no taxes. These states have simply shifted the burden elsewhere, and as a business, you need to know where that pressure might land.

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Benefits of Operating a Business in a No Sales Tax State

Running your business from a NOMAD state can simplify operations and reduce tax-related costs, especially if your sales are concentrated locally or you don’t cross nexus thresholds in other states.

1. You Don’t Need to Collect or Remit Sales Tax for In-State Sales

If your customers are in the same no-sales-tax state as your business, you don’t have to collect sales tax at checkout or file state sales tax returns.

Example: A graphic design studio based in Portland, Oregon, working with small local businesses doesn’t need to add sales tax to its invoices or worry about sales tax filing deadlines unlike a similar agency across the border in California.

2. You Face Fewer Sales Tax Audits

Many audits stem from errors in sales tax collection, filing, or exemption handling. With no state sales tax to manage, your chances of being audited on this front drop significantly.

Example: A local retailer in Concord, New Hampshire, only serving walk-in customers avoids the burden of proving correct tax rates, exemption certificates, or multistate filing history. It’s one less risk to track.

3. You Can Simplify Your Accounting Stack

Businesses in no-sales-tax states don’t need to integrate tax calculation software, manage different tax zones, or perform sales tax reconciliations. This streamlines both finance ops and tech tools.

Example: A Delaware-based SaaS startup selling only to in-state companies can skip third-party tax APIs like TaxJar or Avalara, saving money and avoiding integration complexity.

4. You May Have a Pricing Advantage

With no state or local tax added to the final price, you can offer all-in pricing that feels cleaner and more affordable to local buyers, especially for high-ticket items.

Example: A Montana-based maker of handcrafted guitars sells to customers in-state without tacking on an extra 6–10% tax. A $3,000 guitar stays $3,000, which could feel more attractive than $3,225 in a state like Illinois.

5. You Reduce Administrative and Filing Overhead

No tax collection means no tax returns, no rate updates, and no compliance-related staff training reducing back-office workload and freeing up time.

Example: A small cafe in Juneau, Alaska, operating in a non-taxed borough, doesn’t need to train staff on tax-inclusive pricing or submit monthly filings. Just simple bookkeeping and clean daily closes.

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Potential Drawbacks and Trade-offs for Businesses in NOMAD States

NOMAD states still need revenue to fund public services, and that usually shows up in other parts of the tax system. For businesses, these trade-offs can affect planning, margins, and long-term strategy:-

1. You May Face Higher Income or Business Taxes

NOMAD states often offset the lack of sales tax by charging more on income, corporate profits, or gross receipts.

Example: Oregon has a Corporate Activity Tax (CAT) based on business revenue, not profits. Delaware imposes a Gross Receipts Tax that applies even if you're operating at a loss. New Hampshire levies both a Business Profits Tax and Business Enterprise Tax.

These taxes can be harder to manage because they aren’t tied to net income, and you may owe them even in a low-profit year.

2. Public Services and Infrastructure May Be Underfunded

Some NOMAD states struggle to match the service levels of high-tax states. This can affect transportation, broadband access, healthcare, or workforce training programs.

Example: Businesses in rural Montana or Alaska may find it harder to access reliable infrastructure or government support compared to firms in more heavily funded states like California or New York.

3. Multi-State Compliance Becomes a Priority

Just because your home state doesn’t charge sales tax doesn’t mean you’re off the hook elsewhere. If you sell across state lines and cross economic nexus thresholds, you’ll still need to collect and remit sales tax in those other states.

Example: An e-commerce brand based in New Hampshire that sells heavily in Florida and Texas must still track revenue by state, register in those states, and handle local compliance, even if it collects nothing at home.

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Do You Still Have to Collect Sales Tax When Selling to Other States?

Yes. Even if your business is registered in a no-sales-tax state, you’re still responsible for collecting sales tax in other states if you cross economic nexus thresholds.

What Is Economic Nexus?

Economic nexus laws require businesses to collect and remit sales tax in a state if their sales volume or transaction count into that state exceeds a set threshold:

$100,000 in sales revenue, or
200 separate transactions in a calendar year

These thresholds vary slightly by state, but the idea is the same: if you’re doing enough business in a state, you’re expected to follow its tax rules regardless of where you’re based.

Example: A Delaware-registered e-commerce business with no physical presence in Texas might still hit the $100,000 sales threshold in Texas through online orders. That business must register in Texas, charge the appropriate sales tax on those orders, and file periodic returns even though Delaware itself doesn’t require any sales tax compliance.

Why This Matters

Many businesses assume that being based in a NOMAD state means avoiding sales tax altogether. But sales tax is destination-based, meaning it’s tied to where your customer is, not where you operate from. If you’re selling across state lines, especially through e-commerce, you need systems in place to:

Monitor your sales by state
Register in new states as needed
Calculate and collect the right tax rates

Failing to do so can result in penalties, interest, or retroactive tax liabilities.

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Other Business Taxes in No Sales Tax States

While NOMAD states skip the traditional sales tax model, they still generate revenue from businesses in other ways. In some cases, the alternative taxes can be more complex or harder to predict especially for startups and service businesses.

Oregon: Corporate Activity Tax (CAT)

Oregon charges a Corporate Activity Tax (CAT) on businesses with over $1 million in Oregon-based commercial activity. This tax is based on gross revenue, not net profit, which means you owe it even if your margins are thin.

Example: A software company earning $1.2M in Oregon revenue but reinvesting most of its earnings would still owe CAT, even if it’s breaking even.

Delaware: Gross Receipts Tax

Delaware doesn’t have a state sales tax, but it imposes a Gross Receipts Tax (GRT) on total business revenue. Rates vary by industry and can range from 0.0945% to 0.7468%, applied to gross income with no deductions for expenses.

Example: A marketing agency earning $500,000 in revenue from Delaware clients may owe GRT even if it spent heavily on contractors or tools and had a slim profit margin.

New Hampshire: Business Profits Tax + Business Enterprise Tax

New Hampshire splits its business taxation into two parts:

Business Profits Tax (BPT): A tax on net income.
Business Enterprise Tax (BET): A tax on payroll, interest, and dividends.

This combination ensures businesses contribute even if they aren’t profitable yet.

Example: A startup with no profits but a small team in New Hampshire may not owe BPT but it will still owe BET based on its compensation and financing structure.

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Compliance Tips for Businesses in No Sales Tax States

Operating from a NOMAD state simplifies some parts of tax compliance but it doesn’t mean you can ignore tax rules altogether. Here are some key steps to stay compliant and avoid surprises:

1. Track Economic Nexus Exposure

Even if your home state has no sales tax, you must monitor where your customers are. Keep a close eye on:

Total revenue by destination state
Number of transactions per state
State-specific thresholds for nexus

Tip: Set up monthly reports to flag when you're nearing thresholds in any state.

2. Don’t Assume “No Sales Tax” Means “No Compliance”

Many NOMAD states still impose other taxes such as gross receipts, corporate activity, or enterprise taxes. Understand your filing obligations, even if you don’t collect tax from customers.

Tip: Read your state's business tax guide or consult a local CPA familiar with non-sales-tax jurisdictions.

3. Use Tools to Automate Multi-State Sales Tax

If you sell nationwide, using tools like Avalara, TaxJar, or Stripe Tax can help:

Track nexus thresholds
Register in new states
Calculate the right tax rate at checkout
File returns automatically

Tip: Even if you don’t need them today, set up basic tracking early so you’re prepared when growth kicks in.

4. Stay Informed About Local Taxes and Policy Shifts

In Alaska and Montana, local sales taxes may apply. And while NOMAD states have held off on statewide sales tax so far, policy changes are always possible, especially in tight budget years.

Tip: Subscribe to tax alerts or state revenue department newsletters to stay updated.

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What Should You Consider When Operating In or Selling To NOMAD States?

Being based in a no-sales-tax state sounds simple but it still requires careful planning, especially if you serve customers across state lines or operate in areas with local levies.

1. Know Where Local Taxes Still Apply

Even in NOMAD states, local jurisdictions can impose sales taxes, especially in Alaska and Montana. If you have a physical location or deliver goods in certain cities or boroughs, you may be subject to local sales tax rules.

Example: A home appliance store in Wasilla, Alaska, must collect local sales tax, even though there’s no state-level tax.

2. Understand Your Filing Obligations Beyond Sales Tax

Most NOMAD states collect other forms of business tax like gross receipts or corporate activity taxes. These can be based on revenue, not profit, which may catch early-stage businesses off guard.

Example: A Delaware-based startup with minimal profits could still owe taxes due to the state's Gross Receipts Tax on total income.

3. Consider Out-of-State Obligations More Seriously

If you're selling across state lines, your home state’s policies won’t shield you from economic nexus laws elsewhere. Your actual tax exposure often depends more on where your customers are than where you're incorporated.

Example: An Oregon SaaS company with a large customer base in Illinois and New York will likely need to register, collect, and file taxes in both those states.

Need help tracking nexus, managing registrations, and staying compliant across states? Book a demo with Inkle to see how we simplify multi-state sales tax tracking and business compliance so you can focus on growth.

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Frequently Asked Questions

1. Which U.S. states have no statewide sales tax?

The five NOMAD states, New Hampshire, Oregon, Montana, Alaska, and Delaware, do not charge a statewide sales tax.

2. Can local governments in NOMAD states still impose sales tax?

Yes. Alaska and Montana allow local option sales taxes in select cities or resort areas. New Hampshire, Oregon, and Delaware do not permit local sales tax at all.

3. If I’m based in a no sales tax state, do I still need to charge sales tax elsewhere?

Yes. If your business crosses economic nexus thresholds in another state, you must register there and collect that state’s sales tax, even if your home state doesn’t require it.

4. What is “Economic Nexus” in simple terms?

Economic nexus means your business becomes taxable in another state when your sales or transaction count crosses that state's threshold - commonly $100,000 in revenue or 200 transactions per year.

5. Are there hidden taxes in NOMAD states?

Yes. Many NOMAD states replace sales tax with other business taxes, such as Gross Receipts Tax (Delaware), Corporate Activity Tax (Oregon), or Business Enterprise Tax (New Hampshire).

6. Is it likely that NOMAD states will adopt sales tax laws soon?

Not likely in the short term, but it’s possible. Budget deficits or economic changes could prompt a policy shift. Staying informed is key.