Sales Taxation

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U.S. sales taxes imposed by state and local governments are typically imposed on final retail sales of personal property and other non-real estate goods, but not services. Typically restaurant food is subject to tax, but grocery store food is not. Most states also have an eclectic selection of other exemptions. Sale tax rates typically range from 3% to 9% of the retail price and are almost always collected by the seller and calculated at the time of sale rather than included implicitly in the price (in contrast value added taxes are usually included implicitly and apply at both the wholesale and retail level).

Goods purchased by mail order or over the internet by a company which does not have a store in the state where the order is made are typically not subject to sales taxes.

Some states impose a "use tax" to be collected by the customer, on goods purchased by mail order or over the internet, but usually this is reserved for large corporate purposes, rather than household purchases, in practice, if not in the letter of the law.

U.S. style sales taxes tend to be very regressive because poor people use a much larger proportion of their income to purchase sales taxable goods, while wealthy people use much of their income to purchase things like real estate and services which are not subject to sales taxes. Sales tax collections also have the disadvantage of varying greatly in the amount of revenue they produce between good economic times and bad economic times.

Many local governments like sales taxes because they generate revenue locally, even though many people who pay the sales taxes don't live in the locality.

There is currently a debate regarding the US moving to a consumption tax based system. The Fair Tax initiative is one of the major advocates.

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