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We hate to break it to you, but no U.S. state is completely tax free. However, in some states the tax burden is lighter than in others. According to the Federation of Tax Administrators, the following states impose no income tax on state residents: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In addition, New Hampshire and Tennessee limit state income tax to dividends and interest income only. In these two states, the bulk of most people's income -- i.e., salary or wages -- goes untaxed. Nice break! Income tax is only one form of tax that states impose. Most states charge a sales tax when someone (resident or visitor) purchases items within the state. Some food products and prescription drugs
are exempt from state sales tax, but this varies from state to state. The Sales Tax Clearinghouse notes that Alaska, Delaware, Montana, New Hampshire, and Oregon have no state sales tax. But even though the state doesn't tax retail sales, individual counties and cities are sometimes allowed to collect sales tax. In Alaska, where the state has no sales tax, the cities of Bethel, Clarks Point, and Dillingham each charge their own 5% sales tax. In addition, many states have excise taxes levied against specific products. Some are aimed at wholesalers and importers, but the consumer pays a few directly. For example, every state has a tax on cigarettes
which ranges from 2.5 cents per pack in Virginia to $1.11 per pack in New York. Benjamin Franklin uttered the famous bon mot, "Nothing in life is certain but death and taxes." That saying still rings true -- even in "tax free" states, the U.S. federal government wants to tax you, too. There is no escape.
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