Sales Taxes
| Author | Jeffrey Wilson |
| Pages | 1311-1315 |
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Of all the taxes Americans are subjected to, sales tax is the more often than not considered the least controversial. Rarely does it inspire the debate of the income tax or property tax. Thus, a useful tax for funding everything from schools to ballparks.
The general sales tax has only been in effect since 1932, when it was imposed on the state of Mississippi and the municipalities of New York City and New Orleans. Special sales taxes, or excise taxes, have been used for much longer: the famous Boston Tea Party of 1773 was held as a protest over such a tax on tea, and the United States first imposed an excise tax on whiskey in 1790.
Within the context of tax revenues, the state sales tax is an important tax. In fact, it is currently the largest source of total state revenues in the country—45 states and the District of Columbia now impose a sales tax, and hundreds of municipalities and local government entities across the United States impose their own sales taxes. Cuts in income taxes and property taxes over the past 10 years have made states and local governments even more dependent on the sales tax.
Although most people assume sales taxes are paid by the purchaser, the general sales tax is considered to be imposed on the seller, and is considered a tax on the privilege of doing business in the state or municipality. It is imposed when the seller completes a sale of tangible personal property or services.
The goods and services covered by a sales tax are generally extensive—virtually any transaction within the state or municipality where money changes hands is covered by the general sales tax, including all consumer goods, entertainment such as movies or sports events, hotels, restaurants, and even items such as phone charges or electrical bills.
Although the seller is required to collect the sales tax, the tax is imposed upon the purchaser as part of the final purchase price. The seller is usually considered ultimately responsible for the collection of the tax as the primary tax collector.
The sales tax is identified in percentage terms within the measure of a dollar—a 4 percent sales tax means for every dollar spent, there will be a four-cent tax. Most government entities utilize a bracket system to identify how much tax is to be paid on specific
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goods. The bracket system allocates how much sale tax is to be paid to a specific dollar amount. For example, the six percent sales tax in Michigan results in the following brackets: no tax due on amounts from $0.00 to $0.10, one cent due from $0.11 to $0.24, two cents due from $0.25 to $0.41, three cents due from $0.42 to $0.58, four cents due from $0.59 to $0.74, five cents due from $0.75 to $0.91, six cents due from $0.92 to $0.99, and for $1.00 and each multiple of $1.00, 6 percent of the sale price. Like Michigan, many states have these specific bracket calculations set out in their statute, although some states delegate this power to an administrative agency.
Sellers are generally required to remit the sales tax on a periodic basis, usually quarterly, sometimes more frequently if the amount of the tax reaches a certain point. Most states allow sellers to keep a small portion of the tax as a payment for the work they do in collecting the tax.
General sales taxes usually contain exclusions and exemptions. These exclusions and exemptions can be quite broad, often including sales of intangible personal property and goods meant for resale. Goods used in production are also often exempted from sales tax to prevent multiple taxations. Most states exempt professional and personal services such as those provided by doctors and lawyers from sales taxes.
The sales tax is a regressive tax—that is, its burdens fall more heavily on poorer people. Because of this fact, basic...
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