1. Ways to Recoup Revenue From Lost Tax Income
2. Alaska
3. New Hampshire
4. Other States With No Income Tax
5. Delaware
6. The Remaining States With Income Tax

There are states with no business tax. Seven states have no income tax, two others have very low income tax, and five have no sales tax. Several of the states treat only some items as tax-exempt, and there are two states that have neither income tax nor sales tax.

Ways to Recoup Revenue From Lost Tax Income

The local governments in these states have other ways to make up the revenue they aren't making from income and sales tax. These other ways to adjust for lost revenue include higher property taxes and increasing either income tax or sales tax. Local governments might also charge more for other services they provide. Local jurisdictions are also able to set their own sales tax rates to recoup money from local shoppers.

Alaska

Alaska doesn't charge sales tax or income tax. Alaska, also known as "The Last Frontier," is one of only two states in the United States that has neither income tax nor sales tax. Some communities in Alaska do, however, charge sales tax on a local level.

New Hampshire

New Hampshire, also known as "the Granite State," is the second state that has neither income tax nor sales tax. The state does, however, make residents file tax returns if they earn interest or dividend income above $2,400 for single filers and above $4,800 for married couples who file jointly. The loss of revenue from income and sales tax is recouped by some of the nation's highest property tax rates.

Other States With No Income Tax

Other states with no income tax include:

  • Florida, which is also called "the Sunshine State," hasn't charged residents income tax since repealing it in 1855. The state does, however, charge property tax and a sales tax of 6 percent.
  • Nevada, home to Las Vegas and also called "the Silver State," doesn't ask residents to pay any personal income tax. This business-friendly state also doesn't charge corporate tax, franchise tax, or inventory tax. The state does charge sales tax at a rate of 6.85 percent, and it collects fees associated with the Las Vegas casinos.
  • South Dakota doesn't tax the income of individuals or corporations. The state claims 4 percent revenue from sales tax and other use taxes, plus its economy is heavily rooted in farming and the tourism industry.
  • Tennessee doesn't charge income tax, but it does charge what it calls "hall tax." Hall tax is imposed on interest and dividend income, though it's slated to end by 2022. Tennessee also charges sales tax at a rate of 7 percent.
  • Texas, also called "the Lone Star State," doesn't charge tax on income. The state's revenue comes from its 6.25 percent sales tax and royalties it gets from the oil and natural gas industries.
  • Washington charges sales tax at 6.5 percent but has no income tax. Local jurisdictions are also allowed to add as much as 3 percent on top of the sales tax. No corporate tax is charged within the state of Washington, but as in Delaware, there is a gross receipts tax imposed.
  • Wyoming is funded largely through natural resources taxes and property taxes but imposes no income tax. A 4 percent sales tax is also charged in Wyoming.

Delaware

In Delaware, no sales tax is added to purchases at either the state or local level. This is done to encourage people from other states to shop there. The state does, however, have one of the 20 highest income tax rates in the United States. The state also relies on corporate income tax to cover the income lost from not imposing a sales tax.

The Remaining States With Income Tax

The remaining 41 states in the U.S. charge either a flat tax, where each individual pays income tax at the same rate, or a progressive tax that's determined by how much is earned each year. At the federal level, everyone is required to pay income tax at a percentage based on the amount earned, which is also called an "income bracket." After filing tax returns, people may get state or federal tax refunds, though state refunds are only possible for residents of states that charge income taxes.

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