Given the last two inputs, the Sales Tax Calculator can calculate the before-tax price, the sale tax rate, and the final or after-tax price.
A sales tax is a consumption tax levied by the government on selling specific goods and services. Typically, the merchant collects the sales tax from the consumer when they purchase. In most countries, sales tax is known as value-added tax (VAT) or goods and services tax (GST), a type of consumption tax. In certain countries, the quoted prices for products and services reflect the pre-tax value, with sales tax imposed only during the purchase. In other countries, the indicated prices reflect the final after-tax value, which includes sales tax.
The United States does not have a federal sales tax. There is no statewide sales tax in place except for five states (including the District of Columbia, Puerto Rico, and Guam). These include Alaska, Delaware, Montana, New Hampshire, and Oregon. Sales tax rates vary by state, and local or city sales taxes may apply even within states. Unlike VAT, which is not imposed in the United States, sales tax is solely levied on retail purchases; most business-to-business transactions are exempt from sales tax
The sales tax rate varies by state and type of commodity or service, and each state enforces sales tax differently. Prescription drugs and food seeds are tax-exempt in Texas. Vermont has a 6% general sales tax, but an additional 10% tax is levied on purchases of alcoholic beverages that are immediately consumed. These are just a few instances of how taxation differs among jurisdictions. The rules and regulations governing sales tax vary greatly in each state.
On average, sales taxes cost Americans around 2% of their income. The sales tax accounts for about one-third of state government revenue and ranks second only to the income tax in terms of importance as a revenue generator. Reliance on sales taxes varies greatly by state. Sales taxes are far more significant in the South and West than New England and the industrial Midwest. The sales tax generates more than half of the tax revenue in Florida, Washington, Tennessee, and Texas, with several states raising nearly 60% of their tax revenue. In contrast, sales tax accounts for only around 20% of New York's total revenue
The following is an overview of sales tax rates in various states.
When the United States was still a British colony in the 18th century, the English King levied a sales tax on numerous commodities on American colonists even though they had no representation in the British government. This taxation without representation, among other reasons, led to the Boston Tea Party. This, combined with other events, resulted in the American Revolution. As a result, the debate over a sales tax played a role in forming the United States. Since then, sales tax has had a rough history in the United States, which may explain why there has never been a federal sales tax. Some of the early attempts at implementing a sales tax caused significant complications. Sales taxes did not take off until the Great Depression, when state governments struggled to find effective revenue-raising strategies. Sales tax won out over the many other ways examined because economic policy in the 1930s was oriented toward selling things. Mississippi was the first in 1930 and quickly followed throughout the country. Today, most states impose a sales tax as a necessary and typically effective means of raising money for state and municipal governments.
When filing federal income taxes, taxpayers must choose whether to take the standard or itemized deductions. Everyone's decision will differ, but most Americans prefer the standard deduction. Only itemized deductions allow for the deductibility of sales tax from federal income tax. In general, taxpayers who deduct sales tax may find that itemizing deductions is not worth the effort. Itemizing deductions necessitates thorough record-keeping and can be time-consuming because the IRS requires submitting sales tax documents, such as a year's purchase receipts. Anyone planning to itemize should keep careful records, which will be particularly useful in calculating the sales tax paid.
After deciding between basic or itemized deductions, taxpayers must decide whether to claim state and local income taxes or sales taxes (but not both). Most filers deduct income taxes since it usually results in a higher amount. However, if the overall sales tax payments exceed the state income tax, taxpayers who made big purchases during the year may benefit by deducting sales tax rather than income tax. Taxpayers who purchased a new car, wedding, engagement ring, vacation, or many big appliances during a tax year may have paid more in sales than income taxes. Fewer than 2% of Americans claim sales tax as a yearly deduction.
For further information or to perform income tax computations, please visit the Income Tax Calculator.
VAT is a type of sales tax widely utilized outside the United States in over 160 nations. VAT is an indirect tax levied at various stages of producing goods and services as value is added. Countries that charge VAT can apply it to both imported and exported goods. VAT is typically levied on all supply chain actors, including wholesalers, distributors, suppliers, manufacturers, and retailers, rather than just the final customer, as with U.S. sales tax. VAT is computed by subtracting the cost of previously taxed components or parts from the sales price.
The Tax Foundation's 1979 study provided insight into the reasons for and against VAT compared to sales tax. The most significant advantage of VAT taxation is that it applies at every stage of a good's production cycle, making tax evasion more difficult. Furthermore, when all actors in a supply chain are taxed, the incentives to manage costs become stronger. Compared to sales tax, VAT has the potential to generate more income at a given rate. VAT, on the other hand, has a regressive effect, which means that it takes proportionately more from lower-income individuals. Furthermore, the cascading tax harms new and marginal economic operations is likely to trigger inflationary tendencies and is adverse to exports. For further information or to perform VAT calculations, please visit the VAT Calculator.
GST is identical to VAT. It is an indirect sales tax levied on certain goods and services at various points throughout a supply chain. Taxation in several countries that apply either a "GST" or a "VAT" is so significantly diverse that neither term adequately defines it. Spain, Greece, India, Canada, Singapore, and Malaysia define their "sales tax" as GST