17 States That Don't Tax Liquor or Spirits

When it comes to taxing alcohol, each state has its own rules. Beer, wine, and spirits are often taxed at different rates.

Spirits — which go through an extra distilling process to create drinks such as vodka, tequila, and whiskey — frequently are taxed the most due to their high alcohol content.

However, some states have no spirits tax — an important caveat to consider when making your retirement plan, budgeting for events or parties, and calculating the general cost of living from state to state.

Here are the states with no taxes on alcohol, specifically spirits. Alcohol consumption rates come from the National Institute on Alcohol Abuse and Alcoholism. Each state's favorite choice of alcoholic beverage comes from a Consumer Affairs analysis.

The Yellowhammer State's residents drink 2.06 gallons of alcohol per capita annually, and their favorite spirit is tequila.

Alabama has low income tax rates, which range from 2% to 5%. In addition to having no tax on spirits, residents pay no taxes on estates, and there is no inheritance tax.

Gem State residents average 2 gallons of alcohol per capita each year and are partial to whiskey. Beer taxes are a low 15 cents.

Idaho's income tax is a flat tax that charges a rate of 5.8% to all residents.

In the Hawkeye State, per capita alcohol consumption is 2.49 gallons annually. Vodka is the most popular spirit, and you won't have to pay any taxes to enjoy it.

Iowa's beer tax is also exceptionally low, at just 19 cents. Income tax rates range from 4.4% to 5.7%.

In the Pine Tree State, residents tip back 2.97 gallons of alcohol per capita each year. Folks in Maine prefer to drink hard seltzer.

Income tax rates range from 5.8% to 7.15%.

Michigan residents can enjoy tax-free spirits and their beer tax is low as well — just 20 cents. The most popular drink in the state is vodka, and per capita alcohol consumption is 2.49 gallons annually.

Additionally, the state has a relatively low flat income tax rate of 4.25%.

In the Magnolia State, the drink of choice is vodka. Residents drink about 2.39 gallons of alcohol per capita each year.

The Southern state is not a bad place for those looking for a low cost of living either, with a 4.7% flat income tax rate.

Montana residents enjoy tax-free spirits and pay a low beer tax (just 14 cents). That's good news for Montanans, as the state is in the top five when it comes to alcohol consumption — 3.34 gallons per capita annually. Beer is Montanans' drink of choice.

Montana has a two-bracket, graduated income tax system that ranges from 4.7 to 5.9%.

New Hampshire residents consume the most alcohol per capita among all the states, at about 4.43 gallons annually. So, it's fortunate that residents of the Granite State don't pay extra taxes on spirits or wine. The drink of choice is vodka.

New Hampshire taxes income, but only in the form of dividends and interest income.

North Carolinians tend to opt for vodka and consume an average of 2.39 gallons of booze per capita every year.

There are several other draws that make the state attractive: natural beauty, lively cities, and a relatively low, flat income tax rate of 4.5%.

In the Buckeye State, the drink of choice is vodka. Residents drink an average of 2.13 gallons of alcohol per capita each year. Residents also enjoy a low beer tax, just 18 cents.

There are several other economic perks to living in Ohio, such as a low, graduated income tax rate that tops out at 3.5%.

The drink of choice for Oregonians is vodka, so it's fortunate that residents pay no extra taxes on spirits. The beer tax is also extremely low (8 cents), and residents knock back about 2.82 gallons of alcohol per capita annually.

Despite the favorable booze tax situation, Oregon is one of the most expensive states in the U.S. to live in.

In addition to tax-free spirits, Pennsylvanians enjoy a very low tax rate (8 cents) on beer — which is great, since it's the most popular alcoholic beverage among residents. People who live in the state consume 2.45 gallons of alcohol per capita each year.

Another perk of living in the Keystone State is the flat income tax rate, which is just 3.07%.

Residents in Utah drink less alcohol than any other state in the nation, just 1.3 gallons per capita annually. When they do drink, there are no taxes on spirits or wine. Beer, however, is the most popular drink.

The Beehive State also boasts a low, flat income tax rate of 4.65%.

Vermonters drink an average of 3.13 gallons of booze per capita every year and the most popular drink is gin.

Besides the booze, the state isn't exactly known for low taxes, with income taxes ranging from 3.35% to 8.75%.

Virginians consume about 2.26 gallons of alcohol per capita each year and vodka is the drink of choice. The state's beer tax is also relatively low, just 26 cents.

Income taxes in the Old Dominion range from 2% to 5.75%.

Residents in the Mountain State drink about 1.82 gallons of alcohol per capita annually and the beverage of choice is beer. While spirits are tax-free, the state's beer tax is also very low, at just 18 cents.

West Virginia's income tax rates range from 2.36% to 5.12%.

Residents of Wyoming kick back about 3 gallons of alcohol per capita every year. There are no taxes on spirits or wine. The tax on the state's drink of choice — beer — is also extremely low at just 2 cents.

Wyoming is also one of only a handful of states that has no income tax.

One of the steps toward a stress-free retirement is to carefully weigh the tax situation in any state where you are thinking of spending your golden years.

In addition to taxes on alcohol, you should be mindful of taxes on property, income, and goods and services.