sales tax us

8/11/2019 Sales Tax US

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Sales tax USGroup 7

Foreign Trade UniversitySeptember, 2014


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Groups members

L Th Ngc Mai 1113340148 Ngc Thanh 1113340202 Nguyn Th Phng Tho 1111340197 Nguyn Th Anh Th 1117340101


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Outline Overview of Sales tax in US Types of Sales tax Tax payer Tax exclusions and exemptions Tax base Tax calculation Tax rate Comparison between Sales tax (US) & VAT (VN) Tax example


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Overview of Sales tax in US

DEFINITION

Sales taxes in the United States aretaxes placed on the sale or lease ofgood s and s e rv ices in the US .

Sales tax is paid by the purc haserat the t ime of s a le and col lectedand r emitt ed by the s eller/retailer .


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Overview of Sales tax in US

Sales taxes are imp osed by individ ual U.S. s ta tes , not by the federalgovernment.

Loca l governments (cities, towns, and counties) in the U.S. may

imp ose addi t ion al sales taxes .

The same merchandise may have a different tax and thus differenttotal cost in one city over another.

As some cities and towns are in different counties, it is also possible

that the local tax rate may differ in different parts of the same city ortown.


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Types of Sales tax

States differ in whether the tax is imposed upon the seller, thepurchaser or on the transaction itself.

There are the three general typ es of sales taxes ; each type will required ifferen t en t i ty to be ob l iged to p ay the tax :

Seller (vendor)privilege

taxes

Consumerexcise (sales)

taxes

Retailtransaction

taxes


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Tax payer

Seller (vendor) privilege taxes.

These taxes are imposed on retailers for the privilege of making

retail sales in the state. Retailers usually have the option ofabsorbing the tax (that is, paying the tax out of their own pockets)or passing it along to their purchasers.

Consumer excise (sales) taxes.

A consumer sales tax is imposed on the person who makesretail purchases in the state. Sellers don't have the option ofabsorbing the tax.


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Tax payer States imposing sales tax require retail sellers to register with

the state, collect tax from customers, file returns, and remit thetax to the state.

Procedural rules vary widely. Sellers generally must collect tax

from in-state purchasers unless the purchaser provides anexemption certificate. Most states allow or require electronicremittance of tax to the state.

States are prohibited from requiring out of state sellers to collect

tax unless the seller has some minimal connection with thestate.


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Tax exclusions and exemptions

Nearly all jurisdictions provide numerous categories of goodsand services that are exempt from sales tax, or taxed at areduced rate.

Purchase of goods for further manufacture or for resale Most jurisdictions exempt food sold in grocery stores,

prescription medications, and many agricultural supplies.Generally cash discounts, including coupons, are not includedin the price used in computing tax.


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Tax exclusions and exemptions

To help those groups that are adversely affected by a regressivesales tax, exclusions are often used by the states that levy asales tax. Exclusions in sales tax often include food, clothing,medicine, newspapers, and utilities.For example, since food is a necessity, some states do not taxfood.

Charitable, religious, and educational groups are often excusedfrom paying sales tax under certain circumstances.


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Tax baseThe sales tax is measured by the gross sales price ofthe tangible personal property or services.

Sales price is generally defined as the total amount of

consideration, including cash, credit, property andservices, for which personal property or services aresold, leased, or rented.

As a practical matter, the consideration does notnecessarily have to be in the form of cash or otherproperty.


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Tax base

For example: An assumption of liabilities in conjunction with the transfer of assetsin a corporate transaction commonly represents taxable considerationin California. Finance, interest, or carrying charges may be excludedfrom the tax base.

Likewise, most states exclude transportation charges.

However, some states require charges such as finance andtransportation charges to be separately stated to be excluded from

the tax base. Other commonly allowed deductions include trade-ins,discounts, coupons, rebates, and returns and allowances.


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Tax calculation

Sales tax = Purchase price * Appropriate taxrate

If there is a "sales tax" on purchased items, it is not marked assuch on the label or menu. The tax normally will be added to theprice at the cash register or added on the bill.

Alcohol, medicines, jewelry, cigarettes, restaurant meals, clothing,electronics, services, and many other things except gasoline canhave a tax tacked on to it at the end.

For example : A bottle of wine will retail for $50. The local tax on alcohol is 20%.20% of $50 is $10. This means that $10 will be added to theprice of the bottle of wine, $50, to cover the tax and thetotal sum that must be paid is actually $60.


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Tax calculation

Sales taxes are applied to items purchased and not to separately-listed charges for labor or services.

For example, a repair bill might list the price of parts used, with a

sales tax applied to their purchase, but if the cost of theinstallation labor used is listed separately, the sales tax is notapplied to that portion of the bill. No sales tax is imposed on anygratuity or "tip" that you may choose to add to your bill, because itis considered a payment for labor or services.


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Tax calculation

All states that apply a sales tax have an established rate. Thisestablished rate can pose problems. All people, no matter how muchmoney they earn, pay the same percentage of tax. Such a tax iscalled a regressive tax because the people with smaller incomes paya larger percentage of their money into the sales tax system thanpeople with higher incomes.

However, since all people use state services, such as state highways,state public schools, and state medical institutions, all should pay atax for using these services.


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State and Local Sales Tax Rates as ofJanuary 1, 2014

State State TaxRate Rank

Avg.Local TaxRate (a)

CombinedTax Rate Rank

Max Local

Alabama 4.00% 38 4.51% 8.51% 6 7.00%

Alaska None 46 1.69% 1.69% 46 7.50%

Arizona 5.60% 28 2.57% 8.17% 9 7.125%

Arkansas 6.50% 9 2.69% 9.19% 2 5.50%

California (b) 7.50% 1 0.91% 8.41% 8 2.50%

Colorado 2.90% 45 4.49% 7.39% 15 7.10%

Connecticut 6.35% 11 None 6.35% 31 Delaware None 46 None None 47

Florida 6.00% 16 0.62% 6.62% 29 1.50%

Georgia 4.00% 38 2.97% 6.97% 23 4.00%

Hawaii (c) 4.00% 38 0.35% 4.35% 45 0.50%

Idaho 6.00% 16 0.03% 6.03% 36 2.50%


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State State TaxRate RankAvg.

Local TaxRate (a)

CombinedTax Rate Rank Max Local

Nebraska 5.50% 29 1.29% 6.79% 26 2.00%

Nevada 6.85% 8 1.08% 7.93% 13 1.25%

New Hampshire None 46 None None 47

New Jersey (e) 7.00% 2 -0.03% 6.97% 24

New Mexico (c) 5.125% 32 2.14% 7.26% 16 3.5625%

New York 4.00% 38 4.47% 8.47% 7 4.875%

North Carolina 4.75% 35 2.15% 6.90% 25 2.75% North Dakota 5.00% 33 1.55% 6.55% 30 3.00%

Ohio 5.75% 27 1.36% 7.11% 19 2.25%

Oklahoma 4.50% 36 4.22% 8.72% 5 6.50%

Oregon None 46 None None 47

Pennsylvania 6.00% 16 0.34% 6.34% 32 2.00%

Rhode Island 7.00% 2 None 7.00% 21

South Carolina 6.00% 16 1.19% 7.19% 17 3.00%

South Dakota (c) 4.00% 38 1.83% 5.83% 40 2.00%

Tennessee 7.00% 2 2.45% 9.45% 1 2.75%

Texas 6.25% 12 1.90% 8.15% 11 2.00%


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State State TaxRate RankAvg.

Local TaxRate (a)

CombinedTax Rate Rank Max Local

Utah (b) 5.95% 26 0.73% 6.68% 28 2.00%

Vermont 6.00% 16 0.14% 6.14% 34 1.00%

Virginia (b) 5.30% 31 0.33% 5.63% 41 0.70%

Washington 6.50% 9 2.38% 8.88% 4 3.10%

West Virginia 6.00% 16 0.07% 6.07% 35 1.00%

Wisconsin 5.00% 33 0.43% 5.43% 44 1.50%

Wyoming 4.00% 38 1.49% 5.49% 43 2.00%

D.C. 5.75% (27) None 5.75% (41)


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Comparison between Sales tax (US)& VAT (VN)

Similar i ty

Both are consumption tax Both are imposed on transfers of property and

on rendition of services Ultimately charged in full to the final purchaser

(the end consumer bears the tax)


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Comparison between Sales tax (US)& VAT (VN)

Sales tax VATTransfers of tangible personal property Imposed on transfers of goods in

general(applies to virtually all kinds ofproperty.)

Collected on retail sales at the time ofthe sale to the final consumer, andonly the final sale in the supply chainis subject to tax.

Imposed on each stage of the supplychain

Difference


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Tax example

A shirt costs $20. Subtract all coupons and discounts. Assuming youbuy it in each state as follows:

States State sales tax rate Average Local sales tax rate

Alaska 0% 1.69%

California 7.5% 8.41%

Delaware 0% 0%


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Tax example If its bought in Alaska:

The amount of state sales tax you must pay is:$20 * 0% = $0

Average local sales tax you must pay in case you buy it in the area thatimpose additional local rate is:

$20 * 1.69% = $0.338 As a result, the total amount is

$20 + $0 + $0.338 = $20.338This amount may fluctuate with regard to the local place you buy theshirt in Alaska State.

Its the same to two remaining states:

In California, you possibly pay around:$20 + $20 * 7.5% + $20 * 8.41% = $23,182

In Delaware, they dont impose state sales tax as well aslocal sales tax. Thats why you only need to pay $20without any additional amount.


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