Are the Ways in Which Business' Use/Display Sales Tax Regulated?

I shop at businesses like everyone else, and I know that when I go a buy a shirt that’s $24.99 on the price tag, the price isn’t ACTUALLY $24.99 because the 7% sales tax will make it more expensive.

I also really like food trucks and, more often than not, the food they serve will be $10 even, without any added cost. I know they require me to pay the same sales tax that the mall does, but I’m assuming they’re figuring it into the price on their end to make it easier on my end.

This leads me to ask: Is the way taxes are displayed/used regulated? Is there a benefit to doing it the retail way or the food truck way? If I had to make a guess, the retail way is better in the long-run because they can fool people into thinking an item is cheaper than it is, however the food truck way is just easier!

If they wanted to, could the government require all businesses to display their products as a “true value” integer versus the “before tax” integer?

My guess is a law that requires businesses to only list prices after taxes would be unconstitutional because it would be compelled speech. In general government can not compel speech without a legitimate and appropriate reason. So protecting health by requiring nutritional information on food is constitutional but making it easier to figure out exact change would not pass muster.
Most businesses would prefer to have the lower price on the sticker because that is where the customer makes the buying decision. The reason food trucks refrain from this is because they deal with cash and making change slows down the process and they only have a short amount of time to process the transactions.

I would think that doing what the OP suggests would also make it impossible for stores to advertise prices, even locally, since they might vary from state to state and even city to city. That’s going to inconvenience customers in a different way than what you suggest would improve things for them.

In the UK, sales tax, known as VAT (Value Added Tax) is always included in retail prices. In places like Costco, which are really aimed at wholesale, The price is shown without VAT, but the VAT is always shown beside it.

Some people like my disabled wife, are exempt from paying VAT on some products and equipment. Since it adds 20% to the price, that’s a big saving. We just bought her a new chair for £699; it would have been ££839 otherwise.

Correct me if I’m wrong, but isn’t the VAT consistent across the UK? That’s not the case with sales tax in the US, which varies state to state and even within states.

I can’t say what’s allowed in all states but here in Rhode Island I do know that the merchant is responsible for turning over the proper percentage of sales totals to the state as sales tax and the amounts of tax do not have to be specified for the purchaser. A store may sell an item for $10 on the nose if they like to the customer, they are responsible for reporting the proper portion of that to the state as sales tax. What the state wants to see is accurate records of the total, they’re going to take their cut based on that no matter how it was broken down for the customer.

It is a different matter if there is a stated retail price for an item and the store adds the incorrect amount of sales tax to that in the total. This isn’t the concern of the tax dept. here. This comes up occasionally with arcane requirements such as taxing bottled sodas but not bottled water. I don’t know how the state would deal with this here exactly. I imagine it’s more the responsibility of licensing departments than the tax collectors.

I could have sworn that Massachusetts had two separate provisions about sales taxes. From what I remember, the nominal sales tax rate was 5%. The actual sales tax was 5/105 of revenue collected pertaining to taxable sales and services. The second provision allowed merchants to charge customers a 5% sales tax above their advertised prices as long as they separately noted the sales tax on the receipt or invoice. Then, they paid sales tax on the combined sales price and tax collected, at a rate of 5/105. This worked out to exactly 5% of the advertised price.

With this method, if you charged $10 for an item, you could either charge extra sales tax, making the customer’s total $10.50 (50 cents in sales tax to be remitted to the state), or you could charge $10 with no separate sales tax, and pay sales tax of $10*5/105 (about 47.6 cents). If you did the latter, the sales tax came straight out of your advertised price.

Unfortunately, despite this clear recollection of how the tax worked in Massachusetts, I can’t find anything to confirm my memory. It looks like you must now state and charge a separate sales tax in Massachusetts.

Perhaps I was thinking of another state. Even though my recollection of Massachusetts sales tax might be wrong, that could be exactly the way other states do it, in which case, your food truck guy isn’t doing anything wrong as long as he pays the sales tax in the end.

Prices of items already vary from city-to-city or state-to-state. It wouldn’t make any difference.

The town I grew up in has the county line running down the center of Main Street, and because there is also a county sales tax, a ten dollar item would cost more on one side of the street than the other, since each county sets it own sales tax rate. And then out beyond the city limits sign, there would be a slightly lower price on each side of the road, exempting the city sales tax. So at a crossroads with a shop on each corner selling the same item at a nationally advertised price, they would ring up at four different totals.

This may depend on where you live. Here in Ohio, carry out food is not taxed, although all beverages are, even if carried out.


You mean like every time a fast food chain advertises their $7 lunch deal? If they could only list the after-tax price, then at least here, locations in one county would be eating 0.4% of additional tax costs. Or eating 2.2% compared to the neighboring state (15 miles away, and part of the same metro area).

You’re idea would make it impossible to put out advertising with prices on them.

I see where you’re coming from.

But what if the tax was regulated nation-wide? Then it would work, right?

I was going to point out exactly this, except it’s not all beverages, just carbonated or sugary ones. Tea and coffee, as well as many juices, (even on tap), are exempt from tax.

I would guess that this is probably the answer to the OP’s question, in that there simply is not tax charged on the food trucks, though without knowing what state he is in, I couldn’t say for sure.

The tax would need not just be be regulated nationwide but uniform nationwide, and that’s basically what a VAT is in the UK.

That varies by state, too. Here in Minnesota, grocery food is exempt from sales tax, restaurant meals are not. Delivery meals & pickup (take-out) are supposed to charge sales tax, too.

No, they do it all the time. The national advertising just says (in tiny print at the end) “(local prices may vary)” or “(local taxes may apply)”.

Then each franchise store decides for themself what price they will charge: in many locations, customers are used to paying sales tax on top of the price, so they charge $7 + 42¢ tax; other places customers would object so they decide to charge $6.58 + 42¢ tax = $7 total. Like everything in retail, ultimately depends on what the customer will accept.

It definitely is regulated, but there are differences between various states or countries.

In Washington state, you basically have two ideal options:

  1. display the price before tax. On the final receipt, list the tax paid and the total due. In Seattle, that might be $5.00 for lunch, 0.48 in tax, 5.48 total due, listed on the receipt like that.
  2. display the price after tax. On the final receipt, indicate “Sales tax included” or some equivalent. That might mean 4.56 for lunch and 0.44 in tax, 5.00 total due, but with only the total provided to the customer.

There are various rules about what to do with you if you fail to keep documentation that uses one of the two rules. Not all of these outcomes are very friendly to the business.

(And, yes, our food trucks are taxed. I think all prepared food is, but there are probably some exceptions.)

State law can prohibit certain kinds of advertising and sales techniques in the interest of protecting the consumer from being taken advantage of.*

I used to own a business in Tennessee. TN state law specifies that you can advertise a price as “$12.50 plus tax” or you can say “$13.70 including tax” but you CANNOT say “The price is $13.70 and we will pay the sales tax for you.” At least, that was the law ten years ago; they may have changed it.

  • As a side note, Oregon has a law about home solicitation sales, which was written to combat unethical companies who sold vinyl windows door-to-door. They have to give you 3+ business days to change your mind. There is a specific form they have to give you (two copies).

I think so. I’m pretty sure there are states that require taxes to be added separately. Some allow “tax included” prices, but some don’t IIRC, so I don’t see why they couldn’t go the other way.

I know my son commented when he bought a roll of film in Paris (in 1991, when film was still used) that it was so nice that the displayed price was the price he had to pay.

In Quebec it is illegal to disguise the sales tax, although you can advertise a “tax included” price. All restaurant meals and all “prepared” foods (this includes rotisserie chicken) is taxed, but foods and drinks in supermarkets are not. When I lived in Illinois, everything, including groceries, was taxed.

You know, the art of taxation has been described as getting the maximum of pig with the minimum of squeal. Here they do it backwards, minimum tax and maximum squeal. Not just with the sales tax added at the register, but also the elaborate income tax forms everyone must fill out, even when they have little or no tax to pay. A royal PIT. And don’t get me started on the FATCA.