Sales Tax

Sales taxes are calculated on the sale price, not on the original price. This is normally calculated as a percentage of the sale price.

 

The merchant has the responsibility to collect the sales tax remand to the state.

Resellers are exempt from sales tax. (VAT is different)

 

Taxes in most countries

Some countries/states exclude essential items like food from sales tax. In most countries it ranges from 5% (such as Japan) to 20 or 25 % (such as Germany, France, Hungary).

China has 17% as the tax rate.

India charges 12.5% as VAT.

Japan charges 5%.

Malaysia charges 5%

Singapore charges 7%

Pakistan charges 16%

USA charges anywhere between 0% to 10.25%

 

To see example for tax rates in developing countries, we can check the Indian tax rates

Sales tax in India

In India, VAT is implemented. The rate for most items under VAT is 12.5%

 

 

 

To see example of tax rates in developed countries, we have taken the example of North Carolina, USA.

Sales tax in NC

 

Levied by state                 = 5.5 %

Most counties                   = 2.25 %

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Tax in most counties      = 7.75 %

Some counties                  = 8 %

Tax in Charlotte/Mecklenburg County   8.25 % (extra 0.5% is for funding light rail system)

 

Sales taxes are regressive?

If the tax rates decreases as the amount subject to taxation increases, these taxes are considered regressive.

If the tax rates are fixed, taxes are considered regressive if the poor are more likely to be subject to this tax.

In the same way, sales tax is considered regressive. Food, clothing and other essential items take up a higher percentage in a poor person’s expenditure. As most of these are subject to sales taxes, while investments, land-buys, attorney fees, etc are not subject to sales tax.