Talk:Sales tax

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Former good article nominee Sales tax was a Social sciences and society good articles nominee, but did not meet the good article criteria at the time. There are suggestions below for improving the article. Once these issues have been addressed, the article can be renominated. Editors may also seek a reassessment of the decision if they believe there was a mistake.
May 9, 2011 Good article nominee Not listed
WikiProject Taxation (Rated Start-class, Top-importance)
WikiProject icon This article is within the scope of WikiProject Taxation, a collaborative effort to improve the coverage of tax-related articles on Wikipedia. If you would like to participate, please visit the project page, where you can join the discussion and see a list of open tasks.
Start-Class article Start  This article has been rated as Start-Class on the project's quality scale.
 Top  This article has been rated as Top-importance on the project's importance scale.
 
Note icon
This article was a past project collaboration.
WikiProject Business (Rated Start-class, High-importance)
WikiProject icon This article is within the scope of WikiProject Business, a collaborative effort to improve the coverage of business articles on Wikipedia. If you would like to participate, please visit the project page, where you can join the discussion and see a list of open tasks.
Start-Class article Start  This article has been rated as Start-Class on the project's quality scale.
 High  This article has been rated as High-importance on the project's importance scale.
 

Origin of Sales Tax?[edit]

When the USA was young, Britain had taxes and made everyone pay them. They noticed that not everyone was paying, so they put sales tax so that people had to pay for whatever they bought. It was an inexcusable action, but they didnt care. Thanks --72.146.173.208 23:13, 14 September 2007 (UTC)


Surely this is the same as VAT or is VAT the european name for it? Either way, both pages need to be looked at. Ed g2s 15:17, 14 Aug 2003 (UTC)

According the VAT article they are a variant of conventional sales taxes, I'm not quite clear what the difference is, however. The VAT article also calls Canada's GST, which is locally refered to as a sales tax, a VAT. - SimonP 16:09, Aug 14, 2003 (UTC) neki neki neki neki cute —Preceding unsigned comment added by 115.146.167.218 (talk) 09:32, 24 January 2010 (UTC)

Regressivity[edit]

"Sales taxes are generally regressive, that is, poorer people tend to pay a greater percentage of their income in sales tax than richer people, because they tend to spend a far higher percentage of their income.In some locations, items such as food, clothing, or prescription drugs are exempt from sales taxes ostensibly to alleviate the burden on the poor. Some of these exemptions (such as exemptions for clothing or prescription drugs) actually may make the tax more regressive, since poorer individuals may spend a smaller percentage of their incomes on these items than do richer individuals."

The progressivity of a tax should be measured in whatever is being taxed. A sales tax does not tax a poor person's sales at a higher rate than a rich person's. It is completely flat.

Measuring the progressivity of a sales tax in income is completely arbitrary.

69.19.2.225 12:03, 14 Mar 2005 (UTC)

Measuring the progressivity of a sales tax in income is exactly the definition of progressivity. Please see Regressive tax.
Rmhermen 14:45, Mar 14, 2005 (UTC)
So this article has a lot of flaws in it. But the regressive thing really isn't one of them. That depends on how you measure the regressiveness or progressiveness of a tax. So consider a rich person A and a poor person B. Rich person A makes $100, and poor person B makes $11. Suppose the sales tax is %10. Suppose person A spent $20 on goods subject to a sales tax, and saved the rest. So he payed $2 in tax. Suppose person B spent $10 and paid $1 in tax. So if we measure regressiveness as the share of income a person pays in taxes, then a low earner in this scenario is paying 9% of his wages in tax, and person A is paying only 2% of his wages in tax. Even though the tax rate on goods was supposedly equal, and person A paid more in taxes.
Debomachine 22:36, 4 August 2006 (UTC)
Rmhermen, measuring the progressivity of a sales tax in income is absolutely NOT the definition of progressivity. The definition that you cite for regressive tax is: "a tax imposed so that the tax rate decreases as the amount to which the rate is applied increases." Income is not "the amount to which the rate is applied".
Debomachine, the calculation is rate = tax\ base. There is no flexibility so it cannot "depend" on how you figure it. You have three components to this calculation, rate, tax and base. The rate is the tax percentage. The tax is the amount of tax levied. The base is what is being taxed (in the definition, "the amount to which the tax is applied"). Those are the only three components allowed to be used in figuring regressivity or progressivity. You, on the other hand, are adding a fourth component, that being the base of an entirely different tax model, income tax. You are taking the tax applied against sales and, instead of dividing it by sales ("the amount to which the tax is applied") you are dividing it by something (income) to which it is categorically NOT applied. For this reason, as the first poster correctly states, the resulting relationship is entirely arbitrary. You might as well divide the tax by one's shoe size.
If you want to create a non-arbitrary relationship between sales tax and income, you have to convert the income into the base by defering the unspent portion - which is the part that you are not doing.
Another way to look at the mistake is to understand that by using the wrong base in the calculation you end up not taxing income yet to be spent - and you have to do that if you want to convert income into the base. That is, all income will eventually be spent - so if you are not going to tax it now, you have to reduce the income by the amount not spent (which brings you back to the amount spent which makes your rate flat again). Conversely, if you are going to tax it now then you have to charge the sales tax to all of the income (which will bring your rate back to flat).
It is the same calculation as defered taxes on income, like 401(k) contributions in the US. When you contribute to your 401(k), your taxable income is reduced by the contribution amount.
So if you make $100 and are defering tax on $20 of it (because you made a 401(k) contribution), you are taxed on $80. Then later you will be taxed on the other $20. So if the income tax rate is 25%, you will pay $20 now and $5 later for a total of 25 on 100.
But if you apply the same logic as your regressive sales tax calculation, you would be ignoring the tax that comes later and say that this person was only taxed $20 (because that's what they paid right now) therefore it is a rate of 20% (and it is obviously not a rate of 20%, it is a rate of 25% - thus the mistake). Effectively, you are saying that the $20 contribution was tax free. But it is not. It will be taxed when it is spent. Just like all the income that you are not taxing (that which was unspent initially) in the mistaken regressive sales tax calculation.
The mechanics of the sales tax is exactly the same as defered taxes on 401(k) contributions. The income that is not taxed initially is NOT tax free as your calculation asserts. It is tax defered.
So if you are going to figure its rate, you can tax all of the income now and divide the tax by the income or you can tax just the spending now and divide the tax by the spending. In either case, of course, it will come out to be the same rate because it is a flat rate.
In the example above, this would be like dividing the 20 by 80 or the 5 by 20 or the 25 by 100. But you cannot divide the 20 by 100 which is what you are doing when you call sales tax regressive.
Many people make this mistake so it is definitely worth mentioning. But it has to be pointed out that it is based on a mistake in calculations. This is not a matter of opinion. There is nothing controversial about it. Sales tax is flat, by definition. Let's replace the politics with math.
--72.241.183.173 14:50, 22 April 2007 (UTC)concerned mathmetician


In some sense, it's trickier than that. While tax as a percentage of expenditures is certainly flat, a sales tax (like an income tax, in fact) can become regressive when investment is considered. Consider what happens with a 10% sales tax rate with a person who makes 110$ a year a spends $100 a year. After 10 years he has bought $1000, 91% of what he earned. Then consider someone who makes $150 a year, spends $100 (with $10 tax), and invests $40 (at 5% interest). After 10 years, he will have bought $1000 and saved $528.27, which he can now use to buy $480. In a sense, he has bought 1480/1500=98.7% of what he earned. (edit: 480*1.1=528, which is the correct calculation for sales tax. My point: the interest may be taxed, but taking out the taxes at the beginning can reduce the ability to invest and gain interest).
Obviously this analysis doesn't consider the time value of money, but when we consider investments like the stock market (which has historically fared a lot better than its risk would imply), the idea still can hold. 71.198.7.182 09:05, 8 August 2007 (UTC)
I'm not sure I understand your logic. The $528.27 (savings plus interest) is taxed at 10% when spent, so he can now use $475.44 (not $480). Interest is taxed as well when it becomes consumption. Morphh (talk) 12:54, 08 August 2007 (UTC)

Yes Regressivity[edit]

This line of reasoning makes absolutely no sense, people 'always' end up spending their money eventually so sales taxes are flat? There is a direct correlation to income and savings rates, that is the more you make the more you save. If money earned always got spent then who would ever need a will? Sales taxes are regressive, people with millions or billions of dollars keep their money in stock markets, and use it to make other investments they don't spend it in any where near the proportion that those making less money do. The higher your income the more you save & the more you leave for the next generation, and a lot of wealthy families have maintained their wealth for many generations by saving and investing the majority of their income. If you had $100 billion dollars would you spend it all in your life time or would you save and invest the majority of it? The idea that sales taxes are flat is plainly a logical fallacy and should be removed from the article. —Preceding unsigned comment added by 70.152.233.185 (talk) 19:04, 9 September 2008 (UTC)


You didn't understand the argument. What he means is that for a tax to be regressive, the rate of whatever thing is being taxed (consumption in the case, NOT income) decreases as the quantity increases. The only way a sales tax would be regressive is if, for example, when I buy a tomato i get to pay 10 cents of sales tax, but if I buy 100 tomatoes I get to pay 50 cents. As you say, some families have fortunes that are passed along through generations. So, if you insist on making the base always income. A sales tax will be regressive and (therefore detrimental) to someone that makes $20,000 a year but has $5,000,000 million in his bank account over someone that makes $40,000 a year but has no savings. I'd also like to point out that income is only enjoyed once it's consumed. There's no difference in quality of life of two people spending the same amount a year, even if one of the two earns twice as much. - visose

Sales tax or Excise tax?[edit]

Article reads, "In the United States, it is nearly always explicitly added on and not included in the price, a notable exception is sales taxes on gasoline."

Do we want to refer to gasoline excise taxes at the pump in the US as "sales tax"? Thank you. Have Gun, Will Travel 02:54, 7 February 2007 (UTC)

I've always known it as an excise. Morphh (talk) 03:06, 7 February 2007 (UTC)
Me too. I see Sales tax has a cleanup tag; I'll probably try giving it a work over (unless you got any other suggestions?). Thanks. Have Gun, Will Travel 17:27, 7 February 2007 (UTC) Actually, sales tax is included at the pump due to the fungible nature of the commodity. No one dispenses the same amount each time, so it's easier to simply tack on the sales tax as the gas is pumped. Technically speaking, the pump price in most states includes BOTH sales tax and a state excise tax, plus the federal excise tax. A dollar amount is the basis of the sales tax, whereas a gallon measure is the basis for the state and federal excise taxes. 8-15-07 --Marc

Why is tax such a big thing, everyone has to pay it; it is "natural."What I think is that it is stupid and unnecessary. —Preceding unsigned comment added by 67.82.157.6 (talk) 23:34, 30 September 2007 (UTC)

Final end user and sales tax coverage[edit]

So how does a sale tax vendor work out if you are the final end user? On a VAT system, everyone pays VAT on all purchases, and businesses can then pay the difference between collected and paid VAT. Under a sales tax, what stops someone from buying a computer for work use - presumably paying no sales tax - and then using it for private use? —Preceding unsigned comment added by 60.234.231.99 (talkcontribs)

I would hope the jail time and/or the closing of the business when they were caught for tax evasion. Most sales tax systems require detailed record keeping by business, which are audited by the taxing authority. Sales tax laws vary on what can be purchased and how and by what type of company. Small items like a computer may be something easily evaded and is likely an acceptable and expected level of evasion, which would be a minor impact to the tax base. Morphh (talk) 14:42, 31 March 2008 (UTC)

The first argument would not be using company assets to bypass paying the sales tax as presented. All companies, with the exception of government entities, pay a sales tax for computer purchases unless they are a reseller of said computer and not the end-user. Assuming the the first posting suggests that Company A purchases Brand B computer for company use then that company would have paid at least the state portion of the sales tax and most likely also the locality tax (based on agreements with state/local governements for business/employment establishment). Private use of that same computer would fall under either theft or company policy. —Preceding unsigned comment added by 70.145.43.232 (talk) 14:15, 13 July 2008 (UTC)

This point to follow is in regard to the US. Everyone is charged tax unless they present the seller with a resale certificate stating that the product purchased is for resale. (There are additional industry and use specific exemption certificates avilable too). If the buyer purchases computers and some are for resale and some are for internal use, the buyer has the choice of telling the seller which ones are for which purpose and paying the tax on the invoices that are for internal use. Because of the difficulty and confusion this would cause the seller, it is generally not handled it in this way. This is where "Use Tax" comes into play. Every business must be registered to collect and report sales and use tax in any state in which they have a presence (read: physical presence such as an office, warehouse, etc.). If they receive something that does not have tax included on the invoice, they are supposed to calculate the tax due to the state and local municipalities and report and pay it on their monthly sales and use tax return. You are correct in that the state has no way of knowing whether businesses have been paying their use taxes accordingly until they go in and audit the business. Undercompliance is not as rampant as one might think however, because generally speaking most companies fear the threat of an audit and the associated penalty and interest that would be due from a tax underpayment. Large corporations are continuously being audited by the states in which they operate; as soon as one sales and use tax audit ends, a new one begins. The statute of limitation for how far back a state can look for underpayments is generally 3 years in the US, although a few states have longer statutes of limitation.Agiletax (talk) 13:03, 10 September 2008 (UTC)Agiletax

sales tax[edit]

it is the extra amount charged on the sale and purchase of goods and services it is also said that value added tax means vat and the other form is g.s.t it means general sales tax with two aspacts it can be calculated on purchases and other on sales for sales it is output tax and forpurchases it will be inputtax///////////// —Preceding unsigned comment added by 210.2.150.70 (talk) 09:52, 14 March 2009 (UTC)

Types of Sales Tax[edit]

I removed "retail transaction taxes" from the list of other types of sales taxes, because it seems to be just another label for the "retail sales tax." The description in the reference looked indistinguishable from the definition of retail sales tax.

If somebody can provide a definition for "retail transaction tax" that is clearly different from the "retail sales tax," please add "retail transaction tax" back into the list with that definition. Folklore1 (talk) 16:47, 7 December 2009 (UTC)

I also deleted a reference for the list of other types of sales taxes. It did not describe the other types as well as the linked Wikipedia articles and did not mention the Value Added Tax. Folklore1 (talk) 17:02, 7 December 2009 (UTC)

The description of the VAT makes no sense. Purchasers don't charge a price: "Tax cascading is avoided by applying the tax only to the difference ("value added") between the price charged by the purchaser and the price charged by the seller." Does it mean something like: "price paid and charged by the retailer" ? Or what? Noloop (talk) 19:37, 19 December 2009 (UTC)

I revised the VAT description to more clearly explain how it avoids tax cascading. Folklore1 (talk) 16:59, 4 January 2010 (UTC)

Sales tax planning[edit]

After revising the text and adding some references to this section, I removed the Refimprove and Wikify tags. If you would like to see some other improvements to this section, please leave a note. Folklore1 (talk) 15:30, 20 May 2010 (UTC)

GA nomination[edit]

This article appears to be very similar to Sales taxes in the United States. It makes no serious attempt to discuss non-US sales taxes and so fails on criterion #3 of the WP:WIAGA. Jezhotwells (talk) 18:08, 29 April 2011 (UTC)

Does it focus too much on the United States? Should some of the US material be trimmed? Folklore1 (talk) 16:42, 2 May 2011 (UTC)
Should some of the material in this article be merged into Sales taxes in the United States? Perhaps it would be more useful to leave Sales tax as a small, less than Good article, and try to upgrade Sales taxes in the United States to GA status? That would certainly be easier, because too much source material about sales tax in other countries is non-English. Folklore1 (talk) 16:49, 2 May 2011 (UTC)

GA Review[edit]

Toolbox

See WP:DEADREF
for dead URLs

This review is transcluded from Talk:Sales tax/GA1. The edit link for this section can be used to add comments to the review.

Reviewer: TonyTheTiger (T/C/BIO/WP:CHICAGO/WP:FOUR) 04:34, 7 May 2011 (UTC)

WP:LEAD
  • I believe the opening paragraph might mention the motivations for having taxes such as producing revenue for the taxing authority or curbing consumption on specific types of goods.--TonyTheTiger (T/C/BIO/WP:CHICAGO/WP:FOUR) 03:55, 9 May 2011 (UTC)
History
  • This sentence is unclear to me: "Unlike previous federal excise taxes, this tax is collected directly from the consumer by the seller and based on the sale price rather than a quantity."
  • This section is not sufficiently broad to meet WP:GA standards. It describes the world long term history and United States history of the last 100 years. Without broadening this section to depict most major economies, this article can not be a GA.

The article in general is too focussed on the U.S. to merit further consideration. I am failing this for severe deficiencies in WP:WIAGA 3 (a).--TonyTheTiger (T/C/BIO/WP:CHICAGO/WP:FOUR) 03:55, 9 May 2011 (UTC)

The seller pays the tax to the state[edit]

A sales tax is a tax paid by the seller to a government body. That's why it's called a sales tax. When the tax is paid directly to the governing body by the consumer, it is called a use tax. However, usually laws governing sales tax allow (or require) the seller to collect funds from the buyer for the tax. If the seller fails to collect the funds from the consumer, the seller is still responsible for paying the sales tax in most cases.

This is a subtle distinction but for accuracy and clarity it should be stated in the lead and more clearly explained in the rest of the article. Sparkie82 (tc) 23:48, 25 August 2012 (UTC)

Done. Sparkie82 (tc) 00:16, 26 August 2012 (UTC)