Prompted by a comment in this thread, I’ve often found it strange that in America, the prices marked on goods are exclusive of sales tax, which is then added onto the total at the checkout. This presumably means that, unless you’re good with mental arithmetic, you have no idea what the exact amount you have to pay will be until you get there.
Two questions: first, why is it done this way? I know different states have different tax rates, so printed prices on the packaging wouldn’t be practical, but why not have the tax-inclusive price listed in the store?
Second, do any other countries do it this way? I can’t think of encountering it anywhere else. Yes, in the UK, computers etc are sometimes advertised at prices excluding VAT, but the inclusive price is also listed, and these are often items that would likely be bought by businesses which could reclaim the VAT.
In Ontario the item’s price is listed and taxes are added at the check out. In general this can be extended to all of Canada.
So an $100 item will be assessed a 13% Harmonize Sales Tax (HST) giving a final price of $113. Last year, in Ontario, there would have been 2 taxes, a 5% federal Goods and Services Tax (GST) and an 8% Provincial Sales Tax (PST) each applied to the listed price.
Personally I like seeing just how much taxation goes on.
AFAIK that’s how it works throughout the EU; the Latin American countries where I’ve been may or may not have had a sales tax but the price advertised was always full price; in Switzerland the price advertised was also the price I was charged. I’ve only encountered the situation of “price:9.99… ok I have enough… what do you mean, it’s actually 10.08?” in the USA. Add “service not included” at restaurants, and going to a restaurant in the US is an instant headache for most foreigners, as there’s two things that will need to be added (one of them you’re supposed to add it yourself for a small party) but which are not included in the listed price.
The ticket indicates how much of the total cost is VAT, but the price listed is full.
Your idea makes sense, but practically speaking, people are used to it this way. I can see why it would be confusing for you, as someone not used to the system, but it isn’t actually confusing for Americans. I’ve never heard of any sort of push to change the system. It’s a non-issue, and if some particular shop owner decided to include the tax in the price on the products, THAT would be confusing.
I’ve never been to any other country where they do this, though. That I’ve noticed - I’m accustomed to the tax appearing at the register, so I probably wouldn’t have thought it worth noticing.
The store would certainly have the option to show a final price if they wanted to. In fact in some situations, such as the guy who sells you a beer at the baseball game, they don’t itemize it because they want a nice round number for when people hand money down the row.
However, here we have a culture of wanting to show that the government is taking the money, not the store. So every store itemizes.
However, notably, gasoline does not work like that, the per-gallon price at the pump is what you actually pay. And there is a large amount of federal tax on gasoline in addition to retail sales tax.
There are enough different state, county, local and special district sales taxes in the U.S. to make that pretty near impossible.
In some places, food isn’t subject to sales tax; in some, prescription medicines are exempt.
There was the curious case here where a department store actually straddled a city limit, one city with sales tax, one without. The departments on one side of the store added sales tax to their prices, the departments on the other side didn’t.
And the custom is to charge sales tax on the entire bill, not for each individual item. So if you’re shopping with coupons or a discount card, for example, the tax is based on the total purchase minus the total of the coupons/discount, not the price of individual items.
There are seemingly-arbitrary exceptions to the general rule floating around; some have been mentioned already. Another is movie tickets; the price quoted at the box office typically includes all applicable taxes.
Interestingly, once you’ve paid a nice round $10.50 (or whatever) for your ticket, the soda and popcorn at the concession stand inside will have their pre-tax prices posted on the menu board.
I’m sure we’ve had threads on this before. Basically, it isn’t the country that adds on tax; it’s the state (and/or the city, county, etc.)
There’s no real advantage to the retailer to include sales taxes in their marked prices (why make things look more expensive than they have to); it’d be a real pain to re-mark all the prices if the tax rate got changed; and people simply don’t expect posted prices to include sales tax.
In my state, with the exception of certain businesses, the law states that you must clearly itemize the sales tax charged on the receipt. It also forbids tagging items with the ‘post tax’ price on them, ‘wherever practicable’.
It is apparent that the legislature wishes that consumers be aware of the sales tax, presumably so that they can make informed decisions as voters or somesuch.
If the tax is added at the register, it will be more accurate and fairer, because less rounding will be needed.
If the tax appears on each item, then it will be rounded to whatever unit is used on the label (generally cents). Then, when you bring several items to the register to pay, they all get added together. These rounding errors usually cancel each other out, but not always.
If you have two items whose calculated tax comes to 2.6 cents each, then it would appear on the label as three cents, and you’d pay a total of six, which is 0.8 cents more than the 5.2 that the government is entitled to. Similarly, if their calculated tax came to 2.4 cents, then “2c” would be printed on the price tag, and you’d pay only 4 cents total, thus avoiding your fair share of the 4.8 that the government ought to get. If it is calculated at the register, then in both cases you would pay 5 cents tax, which is still not perfect, but a lot closer than otherwise.
DISCLAIMER: Practically speaking, I agree that there’s a lot to be said for the convenience of having the tax included, as in the examples (already cited by others) of movie tickets and ballpark beer. I’m just showing the other side of the story.
Why is this done? Here is an example of why this was enforced in Canada.
The original federal tax in Canada was a “manufacturer’s tax” charged somewhere in the wholesale chain. It made Canada’s locally manufactured goods (back when there were such) less competitive than imported goods. It was also a pain to administer, since nuances of whether an item was capital or for resale determined whether the tax was applicable; and the underground economy avoided paying taxes on a lot of activity; and it did not cover services, a growing par of the economy.
Brian “Lyin’ Brian” Mulroney proposed replacing the tax with a 7% VAT (Value Added Tax) Goods and Services tax on almost everything. Logically, this was a good idea. The overall tax should be about the same or less - 11% wholesale vs.7% retail. Spreading it over everything would remove some inequities. Only a few things were exempt, like groceries, medical expenses and rents.*
The problem was, that originally the government proposed to roll it into the price to simplify tihngs (like Europe). The NDP, Canada’s socialist party of our nation, led the screaming match and got various concessions from the government. The amin one was that complaint that rolling it into the price was a “hidden tax”. To gain an advantage in the next election, they demanded that the government make the price at the store NOT include the tax, so people would see how much they were paying.
(*Groceries were exempt; but snacks, fast foods, and “single servings” were not. This led to the classic Canadian commercial where some guy is repeating several times… "One donut - GST. Six donuts - no GST… ")
Depends on your theater. the one I worked at (and presumably all Cinemark theaters) advertised post-tax prices on the menu board. It was wonderful, because we didn’t have to deal with any change except quarters.
I don’t see why any of those things are actual issues. If the computers in the cash register can figure out which items are taxed and at which rates, surely the computers that print out the labels on the shelves can do the same calculation.
Percent-off coupons will work exactly the same. If you have a $1 item with a 10% tax rate, the full price is $1.10. Add in a 20% off coupon, and your new price is $0.88. It doesn’t matter which order you apply the tax and coupon in.
Absolute value coupons will work slightly differently, but that doesn’t really make a material difference. It’s not like coupon values are set in stone. If the companies that make the coupons want to have the same effective discount, they can issue $0.55-off coupons instead of $0.50-off.
You’re thinking about it the wrong way. Adding tax into the shelf prices won’t result in more rounding, it will result in none at all.
You’re assuming that the price before tax has to be a whole number of cents, but that’s not necessary. Rather than having two items that cost, say, $0.50 each and have 2.6c tax (rounded to 3c), you’ll have two items that cost, say, $0.503 each, and have 2.7c tax on them, so that the after-tax price really is exactly $0.53 cents.
Companies will structure prices this way because they will get to keep more of the actual sale value. Rounding up the tax just means the government gets to keep it.
The sales tax system we use (here in the USA) was fine back when I was a kid and the tax was something like 2 or 3%. You could pretty much ignore the tax for most purposes as long as you had some change in your pocket to make up the difference.
These days the tax can be 10% or more in some places. That is just a shock if you aren’t expecting it, like if you’re traveling. This, and the fact that internet busineses can get away without charging sales tax, is going to lead us to change to a tax included system, IMO.
Whichever way that you do it, unless you have a tax that is an exact multiple of 100%, there must be rounding somewhere in the calculation. I have in front of me a railway ticket bought in Australia, which cost $29.80. The ticket says “GST $2.71” – that means that the price excluding GST must have been $27.09, so that the GST has been rounded by 1/10 of a cent.
Note also that the ticket is a multiple of 10 cents, so that a half-price fare for children would be a multiple of 5 cents, since the tickets are sold by machines, and the smallest coin available is 5 cents. That’s why they have the odd price $27.09, instead of $27.10, so that after GST is added you have a multiple of 10 cents.
And I’m guessing here, but I think that the half-price ticket, at $14.90, would have GST of $1.35, with a price excluding GST being $13.55, and the GST rounded down by half a cent. With a 10% GST, and 5 cents being the smallest coin, unless the price is a multiple of 55 cents you must have rounding in the calculation somewhere.
I’ve grown accustomed to it, but I must admit that I find this aspect of shopping in the US fairly annoying.
Say I’m cash strapped (hey I’m a student!) and I only have £5/$5 to buy some food essentials.
[li]In the UK, I can go to tesco and if I’m careful, buy stuff that comes to exactly £5, or a little under.[/li][li]But in the US, you have to leave a safety margin of about 10% depending on where you live. Since local/state taxes vary so much for different items, you simply can’t do it exactly.[/li][/ul]
As another poster noted the reason we do it like that in the USA is because pre-tax is less money
I’ve worked in stores and hotels and were always told NEVER quote a price with tax unless the customer specifically asks for it.
It comes as a shock sometimes. Over the holidays I worked in a computer store and the tax was just under 10%. This shocked a lot of people, especially since we had a store in the suburbs (without Cook County tax).
With a lot of online places giving free shipping and no tax, it was almost always cheaper to order online.
I worked in one hotel where they did it backwards, they had full prices on rooms and in the resturaunt and we had to back the taxes out doing the audit overnight. That was a pain, but once you got used to it, it was OK.
So yeah it can be done but it’s not done, because retailer like less amounts. The same way 99¢ seems like a lot less than $1.00 but