NationMaster - Encyclopedia: Sales tax

A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There are usually a list of exemptions. The tax can be included in the price or added at the point of sale. A sales tax is a tax on consumption. ... Point of Purchase: In-store retail display units, equipment and components. ... The percent sign. ... An exemption is a rule or law which excepts certain things from another rule or law. ...

Ideally, a sales tax is fair, has a high compliance rate, is difficult to avoid, is charged exactly once on any one item, and is simple to calculate and simple to collect. A conventional or retail sales tax attempts to achieve this by charging the tax only on the final end user, unlike a gross receipts tax levied on the intermediate business who purchases materials for production or ordinary operating expenses prior to delivering a service or product to the marketplace. This prevents so-called tax "cascading" or "pyramiding," in which an item is taxed more than once as it makes its way from production to final retail sale. A gross receipts tax, sometimes refered to as a gross excise tax, is a tax on the total gross revenues of a company, regardless of their source. ... Wall Street, Manhattan is the location of the New York Stock Exchange and is often used as a symbol for the world of business. ...

Effect on consumers

Sales taxes are considered by some to be regressive; that is, low income people tend to spend a greater percentage of their income in taxable sales (using a cross section time-frame) than higher income people. However, this calculation is derived when the tax paid is divided not by the tax base (the amount spent) but by income, which is argued to create an arbitrary relationship. The tax rate itself is flat with higher income people paying more tax as they consume more. While the tax on spending as a percentage of gross income may be regressive, the effective tax rates can be progressive on consumption due to exemptions or rebates. If a sales tax is to be related to income, then the unspent income can be treated as deferred (spending savings at a later point in time), at which time it is taxed. Sales taxes often exclude items or provide rebates in an effort to create progressive effects. In many locations, "necessary" items such as non-prepared food, clothing, or prescription drugs are exempt from sales tax to alleviate the burden on the poor. Others consider sales tax preferable since it taxes only consumption, which creates an incentive for savings and investment. A regressive tax is a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases. ... Progressive can refer to: Progressive music, including Progressive rock, Progressive metal and Progressive electronica Political Progressivism Several Progressive Parties Progressive Era in the United States (1890-1913) Progressive, a company providing auto insurance The Progressive, a left-wing monthly magazine The progressive tense in grammar Progressive lenses, used to correct... In economics, consumption refers to the final use of goods and services to provide utility. ... In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan. ... Invest redirects here. ...

A related type of tax is the value-added tax or VAT. It is a system in which all businesses remit taxes on their sales but they are also refunded the amount of VAT remitted by their suppliers. In addition to avoiding cascading, under VAT there is no need for government to determine which sales are taxable and which are not, since all sales--retail, wholesale and intermediate--are taxed. Some or all of these taxes may be refunded but it generates a lot of paperwork (and income). The VAT paperwork can be burdensome but it remains a major source of tax income for most of the European Union, Mexico and other countries which charge on average a 15-25% VAT rate. Canadian sales taxes range from 0% in Alberta to an effective 10.6% in Prince Edward Island where sales tax is also applied to the federal Goods and Services Tax. Value added tax (VAT) is a sales tax levied on the sale of goods and services. ... The Canadian Goods and Services Tax (GST) (Taxe sur les produits et services, TPS) is a multi-level value-added tax introduced in Canada on January 1, 1991, by Prime Minister Brian Mulroney and finance minister Michael Wilson. ...

Most countries in the world have sales taxes or value-added taxes at all or several of the national, state, county or city government levels. Countries in western Europe, especially in Scandinavia have some of the world's highest valued-added taxes. Norway, Denmark and Sweden have the highest VATs at 25% although reduced rates are sometimes used.^{[citation needed]} In some countries, there are multiple levels of government which each impose a sales tax. For example, sales tax in Chicago is 9%, consisting of 5% state, 2.25% city, 0.75% county and 1% regional transportation authority. And in Baton Rouge, Louisiana, the tax is 9%, consisting of 4% state and 5% local rate.1 However, there is no nationwide sales tax in the United States. World map showing the location of Europe. ... Scandinavia is a historical and geographical region centered on the Scandinavian Peninsula in Northern Europe and includes the three kingdoms of Denmark, Norway and Sweden. ... Nickname: Motto: Urbs In Horto (Latin: City in a Garden), I Will Location in Chicagoland and Illinois Coordinates: Country United States State Illinois County Cook & DuPage Incorporated March 4, 1837 Government - Mayor Richard M. Daley (D) Area - City 234. ...

Since the 1990s, the idea of replacing the income tax with a national sales tax has been floated in the United States; many of the actual proposals would include giving each household an annual rebate, paid in monthly installments, equivalent to the percentage of the tax (which varies from 15% to 23% in most cases) multiplied by the poverty level based on the number of persons in the household, in an effort to create a progressive effect on consumption. While many political observers consider the chances remote for such a change, the FairTax Act has attracted more cosponsors than any other fundamental tax reform bill introduced in the House of Representatives. For the band, see 1990s (band). ... An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. ... The poverty line is the level of income below which one cannot afford to purchase all the resources one requires to live. ... The FairTax Book, co-authored by Neal Boortz and John Linder, was published on August 2, 2005, as a tool to increase public support for the FairTax Plan. ... The House of Representatives is the larger of two houses that make up the U.S. Congress, the other being the United States Senate. ...

If a person purchases goods from an out-of-state seller, sales tax is not due, but rather the customer may owe a so-called use tax. For example, if a person purchases a computer from a local brick-and-mortar retail store, the store will charge the state's sales tax. However, if that person purchases a computer over the internet or from an out-of-state mail-order seller, sales tax may not apply to the sale, but the person could possibly owe a use tax on the purchase. Because of exclusions on what is taxed and not taxed the typical consumer will pay on average about 1/3 of the listed sales tax on all his/her expenditures, i.e. a 7.5% tax will collect on average about 2.5% of a person’s income.^{[citation needed]} Personal property is a type of property. ... A use tax is a type of excise tax levied in the United States. ...

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See also

Effect on consumers