One of the things I noticed whilst on holiday in the US recently was that the prices on goods- be they pretzels at Disneyland, jeans at Wal-Mart, or games at Electronics Boutique- would suddenly increase by a noticeable amount at the checkout as a result of “Sales Tax”.
Here in Australia, it’s against the law (to the best of my knowledge) to advertise goods for sale at a Tax Exclusive price, unless you’re a Duty Free store. At any rate, the advertised price on goods here is always tax inclusive- if the price ticket on a shirt is $29.99, that’s what you pay at the checkout- not $29.99 plus another random percentage that mysteriously adds another couple of bucks onto the price.
It’s the same in New Zealand and the UK- the advertised price is what you pay, which makes shopping nice and simple.
So, a relatively simple question: Why isn’t this the case in the US?
I believe it’s because the rate of tax varies from state to state (i.e. there’s no single, federal rate of tax like we have in the UK and you evidently do in Australia). But I’ll leave it to the Americans to correct me on that one.
Sales tax varies at an even lower level – it can be different from municipality to municipality, even if both are in the same county in the same state.
Not sure if that’s the reason or not … but it would make sense.
The above posters are basically correct for much of the answer. Manufacturers and retailers often want to have national sales campaigns advertising a certain price and they couldn’t do that if the final price based on local sales taxes was used instead of just one base price. Likewise, books, magazines, and some snack foods have a price preprinted on them and that wouldn’t work if the printed price had to be the final price. Some states have high sales taxes and some have none at all.
Sure, that’s A reason, but it does not prevent the local stores from listing the final price of an item after tax does it? I assume that any store bolted to the ground should know the exact tax in the local they are doing business, no?
I think the real reason is they don’t have to so they won’t. There isn’t a law (with the exception of gas sales, which are so convolutedly taxed it baffles) telling them to post the prices with tax. So if one store started doing it as a convenience to the buyer it would appear as though their goods cost more than the nearest competitor (because the nearest competitor would NOT post the prices with tax included just so they could appear cheapper than the other store).
That, and taxes tend to go up frequently around here so that any signs or menus would constantly have to be changed.
Incidentally, the one place I can think of where sales taxes are typically included in the price quoted is at a bar: If they tell you beers are $X each, that’s the amount you’ll pay (plus whatever you choose to tip).
I think it’s just a custom. There’s no objective reason why a few places like gas stations, flea markets, or bars list their post-tax prices and most other businesses list pre-tax prices.
Actually it would be very difficult to add the tax to a pre-priced item and get it right.
It is not uncommon for a ‘sales tax’ rate to be something like 7.85% That ‘point 85%’ part makes some rounding necessary and so if you buy more than one item, the taxed price on each individual item may be correct but on a group of items, it won’t be correct. And yes the tax “people” do care about single pennies.
It is not impossible to have a tax included price. Movie theatre tickets are a good example. Some places set all their prices with tax to speed transaction. The beer vendor at a baseball game doesn’t want to deal with pennies and such so a tax included price is made for his items.
One related issue that has bugged me is that, if I buy a newspaper from a machine (say the USA Today) it costs 75 cents. But if I buy it from a store, the sales tax is added on and
it’s now 81 cents. So either no sales tax is paid on machine purchases, or the sales tax is
already figured into the machine price, and we are getting screwed when we buy it from the
store (someone-I assume the vendor-pockets the difference if that is the case). Exhibit A in
favor of theory #2 is that it is becoming increasingly harder to find paper vending machines
around here-used to be there would be a nice bank of them outside a typical grocery chain,
but you can’t hardly find them anymore.
That trend hasn’t made it down here yet (New Orleans metro area). Complicating matters … some places will charge tax on a newspaper sold over a counter, and some other won’t
There’s one other case that I can think of: petrol (gasoline). If the pump says $2.999 per gallon, that price includes taxes.
In Ohio, if you buy food at a restaurant to eat on the premises, you pay sales tax, but if you buy it to take away, you don’t. That’s a reason why Ohio restaurants would advertise the price without the tax.
In many places (Texas, for one) this is improper application of the sales tax. The newspaper should be exempt from sales tax when you buy it at the register. You can contact your state’s Comptroller or Tax Collector’s office to verify, and they can investigate/remind stores that are charging tax inappropriately.
One reason I’ve heard for taxes added to the shelf price is that it makes the tax transparent: When I go to the gas station, I really have no idea how much of that 2.499 per gallon is federal, state, or local taxes (there might be a small sticker on the pump, if I look for it), but when I go inside and grab a 32oz fountain drink, and the 89 cent price jumps to 96 at the register, I am aware of how much tax is being charged.
The regionality of sales taxes really is the answer, I believe.
With all the regional taxes, there’s some very strange distinctions set up for sales taxes in some places. The localities that try to micromanage what classes of goods are taxed and what aren’t cause some absurd issues sometimes. I remember a question in CA concerning whether coffee shops were supposed to charge sales tax on muffins or not. People can probably dig up more instances where the manner in which you buy the product affects the sales tax, as in the Ohio “eat on the premises” vs. “take away” distinction.
In fact, I’ll give you another example. When I was living in the Denver metro area, sales taxes differed from municipality to municipality. Furniture stores clustered in one particular area with a low sales tax, and advertised “Pick it up at our store, and pay LOW sales taxes”. If you took delivery of the item, they had to charge you sales tax for the municipality they delivered it to. Cheating was rife. I remember getting a furniture item delivered once, and having an exchange like this with the delivery guy:
DG - “This is Arvada, right?”
ME - “No, it’s Westminster, actually.”
DG - (winking) “You just moved to Arvada.”
whereupon he charged me the lower Arvada sales tax. Exacerbated by the fact that Denver has uniform street numbering making it difficult to guess which municipality a particular street address is actually in.
Which doesn’t apply to sweetened, non alcoholic beverages. (prior to 2004 the standard was if the drink was carbonated) Those are taxed regardless of if you eat in or carry out.
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Americans like to know how much the government is taking every time we buy something, probably because we never trust our government. When I lived in Australia, I had a retail job for a while (pre-GST). I was amazed at the variability of tax rates for various, but identical items. For example, if you wanted a continuous hinge, the tax rate was ten percent. But if you asked for a piano hinge (same item, same store) it was taxed at the luxury tax rate (30 percent). Hidden class warfare at its best. A can of shaving cream (for men) carried a ten percent tax rate. The exact same product (contents) by the same manufacturer for women (with a women’s label) was taxed at the luxury tax rate.
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