Okay, even if they vary from state to state and from county to county, why not just include it in a final price anyway?
In: Economics
I think the taxes are different in different states. That’s why the taxes are not included in the price of product.
Because it’s a percentage and if you buy multiple items the tax amount goes up, it is not a flat rate
[removed]
It’s simpler to just show the base price and everybody knows that taxes will be charged on top of that…
How do you advertise the price when it’s different in every city/county/state? How does an electronics store advertise a TV that’s $599 (plus tax) when it’s $637 in one town, and $640 in another, and $628 in another that all get/see the same ad?
Shops do not want to include the sales tax in the prices they announce. This is so that the products look cheaper then they are. People who have decided to buy a product after seeing the price tag is less inclined to change their minds when they get the final price at the checkout, if they even notice the sales tax at all. So by not including the sales tax in the price tag the stores increase their sales. The more politically correct argument is that a lot of chain stores use common marketing material across all shops in the chain which includes the price. Altering the marketing material for each legislation would cause some complications. Especially for television and Internet advertisements that may not be able to have custom advertisements for each tax legislation region.
I agree with @op – why does the US use such an outdated method of sales tax? Surely it would make sense to apply a universal GST or VAT (like most other countries) then split it – in Australia the federal govt takes a small amount, and the rest is split by the state government along pre-agreed rules – in the UK the proportion is determined entirely by government priorities
Businesses choose to advertise the price without tax and they are legally allowed. They want the product to appear cheaper. It is an extension of left-digit bias pricing (why prices end in .99), and of bait-and-switch tactics. People perceive a lower price because the real price involves math. Some companies take advantage of consumer perception even more by adding a variety of other hidden fees at the point-of-sale. I would like the laws to change for more transparent pricing, but oh boy, what a battle that would be.
A lot of these have valid points but the real root is that you are not taxed on the item that way at point of sale. You are being taxed on the transaction. It’s not a tax on the item’s value but rather the sale. Hence, *sales* tax.
There is nothing like GST or VAT here for regular goods.
Taxes are a line item that goes to the state it doesn’t go to the [retailers](https://sellics.com/blog-u-s-sales-tax-explained-for-both-u-s-and-non-u-s-sellers/).
>States use tax revenues pay for state budget items like schools, roads, and public safety. These items are governed at the individual state level and can vary widely between states. Because of this, sales tax rules, rates, and regulations are different in each state that collects sales tax.
A good example of this variance is with groceries—some U.S. states consider groceries to be subject to tax, while others consider groceries to be non-taxable
>When you file you’ll need to figure out how much sales tax you’ve collected from your customers in each individual state. Most states will also require you to break down your sales by local areas within each state and usually categorized into cities, counties, and other special taxing districts. This can be daunting, but sales tax automation technology can connect to your marketplaces and online shopping carts to simplify this process.
These are the basics of how sales tax works in the U.S. If you’d like to go on a deep dive in the topic, check out our Sales Tax 101 for Online Sellers guide.
Keeping them segrated allows the company to know how much money the states need to collect
For a while in illinois, back in early 2000s, they removed to tax already applied to fuel per gallon, and applied it after you pumped. So you could see how much taxes you were paying for fuel.
Latest Answers