Following on from the dollar coin (yes) and the get-rid-of-the-‘penny’ (why not) threads, I wondered the following.
Having been to the US several times, how on earth do people there tolerate the situation with Sales Tax?
I mean the situation where something is priced at say $9.99. Then when you go to pay the cashier, you have to pay a larger price, say $10.18 or whatever. I know that not all US states have a sales tax, but I believe that most of them do.
Wouldn’t it be easier and more honest just to post the actual price something will cost? We seem to manage all right in Europe with VAT. You will very occasionally see an ex-VAT price quoted, usually on the basis that businesses registered for VAT can reclaim the tax. Makes sense.
Just do for everything what you already do for petrol (‘gas’). If it costs a dollar, put a dollar on the price tag. Is there some insuperable difficulty with this that I have missed?
Merchants like it because it makes the cost seem lower. They also don’t have to calculate the tax for each item until the sale. That’s important – if the tax goes up, they’d have to reprice everything in the store.
Everyone knows that the price is without tax. Also, it is rare that you are buying things with exact change. So it’s rarely an issue.
How often do sales taxes tend to change? If it was more than once a year I could see this point. Otherwise, things get repriced periodically anyway as inflation drives them up and sales drive them down.
It seems like it ought to be to me. How come different rules apply for road fuels? Why aren’t they displayed without tax too?
When I lived in Indiana state taxes actually were added on to the bill for fuels (Federal taxes were included in the bill). That’s changed, but it’s not inconceivable that it could change back.
One good reason for adding sales tax to the price, rather than incorporating it, is that sales taxes vary by jurisdiction. In fact, due to municipal sales taxes, an identical item with an identical retail price could have a different selling price across the street. If I’m a chain store, I’d much rather tell my customers an item costs $9.99 plus tax rather than $9.99 in unincorporated Lake and Will Counties, $10.02 in Libertyville, Joliet and Schamburg, $10.05 in Chicago/Cook County, and so on.
Nuts, too slow… I was going to say something like what kunilou said above. There are also a few instances where an item would be taxed in one situation but not in another. In Ohio, for example, fast food is taxed if you eat it at the restaurant, but not if you get it “to go”.
I’m sure that we the consumers don’t think of that when we decide to put up with this system, but I think most find that it’s not really a big deal.
For a country founded upon a tax protest, we like to see how much the government is costing us. We consider keeping the two separate “honest and fair” because it’s cost imposed by two separate entities.
Also, on the pumps, the amount of taxes is broken down. So while we pay 2.09 for a gallon of gas, we can see that .35 of that goes to the Feds, .19 to the states, and .06 goes to the local governments (or however the breakdown goes - I’m not looking at a pump while typing this.)
Why not have the equivalent notice at every shop, explaining how much of each dollar you spend goes on this that or the other, and just display the actual price paid by the customer?
It seems to me that for a mature capitalist society, this would have been sorted out a long time ago. Are state taxes a relatively recent thing?
Statewide sales taxes are (for a lot of states, not all). I think Georgia got its first (or current - I have no idea what went on in, say, 1824) statewide sales tax back in the mid-90s, for example.
There’s minor annoyances all around. The consumenrs find it minorly annoying that we have to mentally remember 5-8% “extra” on top of the sticker price, the merchant would find it annoying (for whatever reason) to post the total price on the stickers.
Some stores I’ve been in actually do show you the total price after taxes, the vast majority do not. I guess one rationale is the sales price is a figure that is agreed upon between merchant and consumer. What happens after the sale is made (tax applied) is between the consumer and the government, not the consumer and the merchant.
I think the ultimate reason is just the small mental trick that $9.99 looks cheaper than 10, and because of that very minor reason things are priced at .95-$.99 over the dollar value many times and taxes are not listed.
Possibly showing my ignorance here, but could it be that it is frowned upon/illegal to break down the various taxes in Europe? (This is not a troll, just a simple question borne in ignorance.)
Also, to somebody who grew-up here, it’s not that big of a deal. You automatically do the arithmetic when you look at the tag.
No, it’s also economics because it is a cost to you. Just because the cost is imposed as part of the political process does not make it merely “political.”
Another reason (though I’m sure not the primary one) that items are not taxed individually is the problem of rounding. If the sales tax is applied to each item and rounded to the nearest cent, it’s not a problem if you only buy one item. But if you fill your cart with $150 worth of merchandise there will likely be a not insignificant difference in the tax as opposed to the current method of calculating the tax on the total transaction amount and then rounding to the nearest cent.
Nope, not in the parts of Europe I know, anyway. On the (argh, brain fart - what’s the word for that small piece of paper you get when you buy something?) the tax is usually printed under the sum you’ve paid.
Yes, it differs from state to state and city to city in some places. But the nice thing is, that if you live on a border, you can hop over to the other state and buy things cheaper. For example, New Jersey is famous for not having sales tax on clothing, so that’s why you have giant malls in northern NJ filled with New Yorkers.
Mayors also have the power (at least in NY) to temporarily lift sales taxes for a week or so and encourage shopping sprees. Mayors Giuliani and Bloomberg have both done this to boost downtown Manhattan post 9/11.
It would be really strange to me to pay the same tax everywhere I went in a country, but then again it would also freak me out to live in a country so small you’re all in the same time zone.
Sales taxes can also be temporary. California boosted their sales tax after the last big one, to rebuild all the freewyas. When the job was done, the tax vanished. (Not for long…but the initial tax went away.)
Doesn’t happen often across the board, but I bet you’d be surprised to see how often it happens in tourist laden place. The most common I can think of is with Hotel taxes. Everytime a city project comes up that is primarily related to tourism (Navy Pier/Millenium Park/Soldier Field in Chicago) one of the most typical ways to rasie a partion of teh cost is to temporarily raise the tax rate on Hotel Rooms. Those usually are pretty good about going away once they are complete, I’m sure in large part since the hotels push for it actively.
You have to understand that there are probably 12 different tax structures for products in a typical grocery. Food is taxed at one rate, Alcohol at another, Ciggarettes at another, Pharmacuticals at another, etc. If you really wanted to include the price and then put up notices at the check out, you’d have a giant confusing board that invited tons of questions.
Between these overriding factors you can see that the existing system is probably the best one:
Sales taxes vary over fairly short periods of time
Sales taxes on the same product vary by location
Sales taxes need to be displayed easily to the consumer
Sales Taxes are made up of many components, a federal portion, a state potion and a municipal portion which varies by location.
It allows retailers and product makers to easily advertise/market products by price across large areas consistently.
I think the last is the most critical and deciding one, but all combined make the given system the most practical when you understand the significance of us living in a union of states each with their own governments and laws regarding commerce and taxation.
However, there are some cases when taxes are built into the price when it serves the process of making the sale. In these cases the seller is willing to take the extra effort to calculate taxes backwards after the fact because dealing with change and/or undeclared cost would cause trouble or if they are selling only one product which has a consistent tax rate.
