Every state in the union collects taxes in one form or another. Governments require taxes to fund projects, pay the government workers, including the elected officials, police and firefighters. Most states require their citizens pay income taxes. However, there are a few which do not require taxes at all, and a couple of states that only tax specific types of non-employment income.
No Personal Income Taxes
As of the time of publication, Alaska, Florida, South Dakota, Washington, Nevada, Texas and Wyoming do not collect state income taxes on wages earned. The state still receives income from other types of taxes, such as taxes on business income, gasoline, tobacco and alcohol. Alaska earns the majority of its income from taxes on the production and transportation of oil through the Alaskan pipeline. Residents of Alaska even receive dividend checks from the state because of this oil income.
Limited Personal Income Taxes
New Hampshire and Tennessee do not tax income at the state level. These state’s do tax dividend and interest income. If a citizen of one of the states receives interest on a bank account or from a loan, she must pay taxes to her state government on the money earned. This also applies if she receive a dividend from an investment. New Hampshire requires their citizens pay a 5 percent tax on all dividends and interest income. Tennessee charges a 6 percent tax on all dividend and interest income.
Some states charge sales tax while a few states do not. Alaska, Delaware, Montana, New Hampshire and Oregon do not charge any sales tax on purchases. While there isn’t a sales tax in Alaska for the state, the counties and cities may charge a sales tax. The other states listed do not charge a sales tax at the state, county or local level. American Samoa, a U.S. Territory, also does not charge a sales tax at any level.
State Tax Deductions
The some states collect property taxes; however, county governments more commonly collect this tax. Most counties use property taxes to pay for schools and other local services such as sheriff’s departments. Every state must collect tax and one way or another to provide for the essential services needed to run the government. The Internal Revenue Service allows taxpayers to deduct sales tax or property taxes paid over the year from their federally taxable income. The qualification varies on a state-by-state basis of the taxpayer should consult with a CPA or other tax professional before taking this deduction.