Sales Tax is an indirect tax on consumption that is deferred until the end consumer makes a purchased, and taxed in the area they made the purchase (even online since 2018). Some end consumers are tax exempt and can avoid paying Sales Tax. Companies can write off taxes paid where appropriate. Everyone else in the value chain is tax exempt assuming they filed their paperwork correctly. Ultimately this means that there is no equivalent to a VAT recovery, reverse charing, etc, and the governments that collect sales tax don't see any money if something is never sold.
Sales tax is not included in the price because it is based on the price. If a widget is sold for $10 today, there is less tax paid if you sell that widget for $1 tomorrow. It doesn't matter if $9 of additional value was created along the way.
States, counties, and cities can have different sales tax rates for various reasons. For example, my city voted to add to the sales tax to pay for road improvements. There is a lot of travel into our area for consumption so it ends up that visitors pay for roads even if they don't refuel their cars in the city.
Sales Tax and VAT are not bad ideas, they're just different ideas. At the end of the day if your government wants a Dollar, a Pound, or a Euro, they'll find a way to raise it.
Regardless of the distinction between sales tax and VAT, if any given US state wanted to have the state sales tax be included in the price that is shown to the end-user (at least in physical stores that exist in that state), I don't think there's any federal law preventing them from doing so. In other words, rather than having the store list a pack of gum for $1.00 and then charging me $1.06 at the register, the state could just require that the store list the pack of gum at $1.06. If that means the price of a can of Arizona Tea has to vary by, like, two cents when you cross state lines, that's a worthwhile tradeoff.
Sales Tax rates vary by the address and don’t apply to some goods/services. Additionally, some states have holidays (like “back to school no sales tax days”).
That is to say that the retailer needs the recipient’s address before shopping, rather than after. Also, if sales tax is handled by an external API call, those costs would increase drastically if the same call must be made for each product listing price, as opposed to just a few at the end of checkout flow.
The bajillion-jurisdictions problem can be solved on an aggregate basis.
Charge everyone $100 inclusive-of-taxes. Keep $93.50 of that from a customer in Phoenix, $92.75 from a customer in Los Angeles, and all $100 from a customer in Oregon. If you have approximate knowledge of how your demand breaks down, you could come up with an all-inclusive price that produces the average bottom-line revenue you want.
You seem to be hand-waving away the accounting part and the fact that the subtotals for the same goods will be different for users in different cities.
Thank you for clearing that up - I was under the mistaken impression that most goods were subject to sales tax in the US, even in b2b transactions. I was not aware that most entities other than individual people were tax exempt. That makes the end result a lot more similar to VAT than I thought it was (though with a different way of getting there).
Given all that, why would we use a VAT system rather than sales tax? So that the revenue is more evenly spread across the lifetime of a good or service?
It's funny because I think both you and GP answered it? If the end result is almost the same, then... the reasons why one or the other is... Almost none really?
Or to put it another way, for historical reasons?
(I'm playing AC Unity right now... Set in Paris during the French Revolution... And you know what the contemporary city walls were used for? Tax collection purposes...)
This kind of stuff should be settled in trade agreements IMHO...
Which made me think about a future EU-US trade agreement... But guess what? Fucking Trump torpioed it.
Sales Tax is an indirect tax on consumption that is deferred until the end consumer makes a purchased, and taxed in the area they made the purchase (even online since 2018). Some end consumers are tax exempt and can avoid paying Sales Tax. Companies can write off taxes paid where appropriate. Everyone else in the value chain is tax exempt assuming they filed their paperwork correctly. Ultimately this means that there is no equivalent to a VAT recovery, reverse charing, etc, and the governments that collect sales tax don't see any money if something is never sold.
Sales tax is not included in the price because it is based on the price. If a widget is sold for $10 today, there is less tax paid if you sell that widget for $1 tomorrow. It doesn't matter if $9 of additional value was created along the way.
States, counties, and cities can have different sales tax rates for various reasons. For example, my city voted to add to the sales tax to pay for road improvements. There is a lot of travel into our area for consumption so it ends up that visitors pay for roads even if they don't refuel their cars in the city.
Sales Tax and VAT are not bad ideas, they're just different ideas. At the end of the day if your government wants a Dollar, a Pound, or a Euro, they'll find a way to raise it.