A sale tax is a tax imposed by the governing body on the sales of goods and services. The sales tax is levied at the time of purchase, collected by the retailer, and remits the tax to state and local authorities. As the majority of goods pass through so many stages of manufacturing and handled by different entities, an amount of documentation is need to prove that who is finally liable for sales tax. So the conventional or retail sales taxes are charged from the end user of goods or services. Sales taxes are different for different jurisdiction and it may sometimes overlap with other states sales tax. Sales tax is related to use tax that applies to residents who have purchased goods from other countries.
Types of sales tax:
Retail transaction: It is the most common tax and it one of the most common ways that state and central government generates revenue. The sales tax ranges from few points to ten percent of the cost of the product. The sale tax is included in the final price of the product that the consumer buys.
Vendor Privilege: The retailer has to pay this tax for doing business in the state. It is like licensing tax to operate a business and the retail sales tax is different from the vendor privilege tax as it is imposed on the retailer, not on the consumer. The business has an option of paying this tax from their own pockets or by collecting from the customers in the form of higher prices.
Excise: This tax is charged on the products that are not necessary for survival. Alcohol and cigarettes are charged under this excise tax. The manufactures or the wholesaler’s pay these taxes and these taxes are collected from the consumers in form of prices.
Use: This tax is imposed on the customer when the retailer doesn’t charge where it has to be charged. The users are responsible for declaring and paying the use tax in the user home state. It is applicable on interest, television network etc.
Value-added, gross receipts, and wholesale: This additional tax is a way that government can raise revenue based on sales and production of goods and services. It is not charged by the central government, it is charged by the state government. This tax is charged as a percentage of the value added at every level of production of products. The main objective of the VAT is to avoid tax on the tax that means double taxation from the manufacturing to consumption.
Goods and services tax: It is known as a value-added tax and it is also known as the indirect sales tax that is imposed on certain products sold for domestic consumption. The consumers pay this tax and the companies selling the goods and services remit it to the government. It provides revenue for the government.
The component included in the sales calculator:
- Before tax price: The price of the product before the tax is applied.
- Sales tax: The sales tax imposed on the product.
- After tax price: The price of the product after the tax is applied.
The sales tax calculator is used to calculate the tax rate of the product. Any one of the values can be calculated by knowing the input value of the remaining two that is before tax price, sales tax rate or after-tax price.