Sales Tax is a tax on sales or on the receipts from sales. This is a consumption tax imposed by the government on the sale of goods and services.
Many states and cities levy a sales tax on retail purchases. The sales tax is determined by finding a percentage of the purchase price. The percentage of tax called the tax rate varies between different cities and states.
If the tax is 6% and a $10.00 purchase is made, the sales tax is $10.00*6/100 or $0.60.
Sales tax rate and application vary dependant on the state. This tax levied on the sale of goods and services that is usually calculated as a percentage of the purchase price and collected by the seller. It can be applied by counties, cities, and regions in addition to the state sales tax.
Types of Sales Tax
This is one of the most common ways your state and local government generate revenue and can often range from a few percentage points to more than ten percent of the cost of goods! Every time you go shopping, there is a good chance you are paying this tax.
These taxes are imposed on retailers for the privilege of doing business in a state. Think of this as a licensing tax to operate a business. It is different than a retail sales tax because it is charged to the seller rather than the consumer.
This tax is usually charged on items that are not considered necessary for survival. These taxes ultimately raise the price we pay for these items. For example, a bottle of wine that normally costs $9 may have an excise tax of $3 on it. The end result is that you will pay $12 for that bottle of wine.
You may be responsible for declaring and paying a use tax in your home state when you purchase products from an internet site, catalog, or television network that does not charge retail sales tax in the state in which you live.
Value-added, Gross Receipts¸ and Wholesale
These are all additional ways that government authorities can raise revenue based on sales and production of products and services.