Sales tax

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Posted by pompos 02/27/2009 @ 13:38

Tags : sales tax, taxes, finance

News headlines
Stroger allies now agreeing to four-year rollback of sales tax - Chicago Daily Herald
By Rob Olmstead | Daily Herald Staff Cook County commissioners - including some who had appeared poised to back the president in his veto of a one-year rollback of the 1-percentage-point sales tax increase - are now apparently on board with a rollback,...
Sales tax increase gaining traction in state Senate - Boston Globe
''I would rather do the sales tax than any of those other taxes, especially the gas tax,'' Senator Steven C. Panagiotakos, chairman of the Senate Ways and Means Committee, said yesterday. (David L. Ryan/Globe Staff) By Matt Viser Sentiment in the state...
NJ reclaims $40M in sales tax mistake - Philadelphia Inquirer
The zones allow businesses to charge half the normal sales tax and the revenue generated helps fund development within the zones. The mistake dates back to 2006 when the state sales tax increased from 6 to 7 percent. The Treasury Department says half...
Suburbs take heavy tax revenue hit when dealership closes - Chicago Sun-Times
A single car dealership, on average, provides $280000 in sales tax annually to each community, said Jerry Cizek, president of the Chicago Automobile Trade Association. In southwest suburban Countryside, where Chrysler targed Continental Chrysler Jeep...
Stupid Tax Policy - The Star-Ledger -
The BALVOR study also concluded that almost $5 million in general sales tax revenue will be lost. So, the tax increase will cause revenues to fall by almost $12 million. But that's not the entire story. The tax hike will erode convenience store sales,...
HSB bright spot in sales tax receipts - Burnet Bulletin
by Brian Kirkpatrick The May sales tax allocations from the State Comptroller's office to cities in Burnet and Llano counties remain down, but Horseshoe Bay appears recession proof. May's sales tax allocations to local governments represent March sales...
Bradley County Votes on Sales Tax Increase - WTVC
Bradley County residents came out today to vote on a possible increase in county sales tax. If passed, the sales tax would increase from 2.25% to 2.75%. But voters have mixed feelings over whether the tax increase should be passed....
Sales tax collections drop in Texas, nation - Fort Worth Star Telegram
In Texas, sales taxes make up more than half the state's tax revenue. Officials projected these drops in sales tax collections because they expected to see lags in industries such as retail, construction, and oil and gas, said RJ DeSilva,...
ERIE COUNTY: Sales tax shortfall causing concern - Tonawanda News
By Daniel Pye Numbers are in for Erie County's sales tax revenue in this year's first quarter, and the news isn't good. A letter from Erie County Comptroller Mark Poloncarz sent to the Collins administration Wednesday says that state data showed sales...
Mass. sales tax hike would cost jobs, says retailer group - MetroWest Daily News
By John Hilliard A higher state sales tax would hurt jobs, reduce state revenue and drive more Massachusetts consumers to buy online or in other states, the Retailers Association of Massachusetts argues. "The Legislature cannot make the Massachusetts...

Sales tax

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A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There is usually a list of exemptions. The tax can be included in the price (tax-inclusive) or added at the point of sale (tax-exclusive).

Most sales taxes are collected by the seller, who pays the tax over to the government which charges the tax. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Ideally, a sales tax is fair, has a high compliance rate, is difficult to avoid, is charged exactly once on any one item, and is simple to calculate and simple to collect.

A conventional or retail sales tax is charged only on the final end user. To achieve this, a purchaser who is not an end user is usually required to produce to the seller a "resale certificate". The tax is charged on each item sold to purchasers who do not produce such a certificate.

Most countries in the world have sales taxes or value-added taxes at all or several of the national, state, county or city government levels. Countries in western Europe, especially in Scandinavia have some of the world's highest valued-added taxes. Norway, Denmark and Sweden have the highest VATs at 25%, although reduced rates are used in some cases, as for groceries and newspaper. In some countries, there are multiple levels of government which each impose a sales tax. For example, sales tax in Chicago (Cook County), IL is 10.25%--the highest among major cities in the United States--consisting of 6.25% state, 1.25% city, 1.75% county and 1% regional transportation authority, Chicago also has The Metropolitan Pier and Exhibition Authority tax on food and beverage of 1% (which means eating out is taxed at 11.25%). And in Baton Rouge, Louisiana, the tax is 9%, consisting of 4% state and 5% local rate. Combined sales taxes in the town of Arab, Alabama were highest in the US at 12% in 2008 according to a study by tax firm Vertex, Inc. In Tennessee the sales tax is 9.25%, due to the lack of a state income tax. However, there is no general nationwide sales tax in the United States.

The trend has been for conventional sales taxes to be replaced by more broadly based value added taxes, and the United States is now one of the few countries to retain conventional sales taxes. VAT has been adopted by the European Union, Mexico, Australia, Canada (Goods and Services Tax) and many other countries. Most provinces in Canada impose a sales tax alongside the federal GST.

Sales taxes are considered to be regressive tax; that is, low income people tend to spend a greater percentage of their income in taxable sales (using a cross section time-frame) than higher income people. However, this calculation is derived when the tax paid is divided not by the tax base (the amount spent) but by income, which is argued to create an arbitrary relationship. If all purchases are subject to the same tax rate, the tax rate itself is flat with those who consume more paying more in taxes. While the tax on spending as a percentage of gross income may be regressive, the effective tax rates can be progressive on consumption due to exemptions or rebates. If a sales tax is to be related to income, then the unspent income can be treated as tax-deferred (spending savings at a later point in time), at which time it is taxed. Sales taxes often exclude items or provide rebates in an effort to create progressive effects. In many locations, "necessary" items such as non-prepared food, clothing, or prescription drugs are exempt from sales tax to alleviate the burden on the poor.

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Streamlined Sales Tax Project


Organized in March 2000, the Streamlined Sales Tax Project (SSTP) objective is to simplify and modernize sales and use tax collection and administration in the United States. It arose in response to efforts by Congress to permanently prohibit states from collecting sales taxes on online commerce. Because such a ban would have serious financial consequences for states, the SSTP began as an effort to try to minimize the many differences between the sales tax policies and practices of states.

In prior decisions regarding mail order sales, the U.S. Supreme Court ruled in 1992 (in the case of Quill Corp. v. North Dakota, 504 U.S. 298) that mail-order retailers were not compelled to collect use tax and remit the tax to states, in part because of the complexities of doing so. With computers, however, the difficulties of doing so are much smaller today, so the remaining stumbling block lies in the variations among state sales taxes. Organizers of the SSTP hope that by ironing out differences among state taxation levels, they will remove a major roadblock to the collection of taxes on online sales and convince Congress and the courts to allow them to collect these taxes regularly.

As of September 2005, there are 44 participating states, including Washington, D.C. There are 15 full member states (Indiana, Iowa, Kansas, Kentucky Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Vermont, and West Virginia), which are states in compliance with the Streamlined Sales and Use Tax Agreement through its laws, rules, regulations, and policies. And six associate member states (Arkansas, Nevada, Ohio, Tennessee, Utah and Wyoming), which are states in compliance with the Streamlined Sales and Use Tax Agreement except that its laws, rules, regulations and policies to bring the state into compliance are not in effect but are scheduled to take effect on or before January 1, 2008, or (b) a State that has achieved substantial compliance with the terms of the Streamlined Sales and Use Tax Agreement taken as a whole, but not necessarily each provision, and there is an expectation that the state will achieve compliance by January 1, 2008.

The SSTP is setting up a system by which Internet e-commerce companies can voluntarily pay state taxes to the states in which their customers reside. The incentive the SSTP is offering companies is rather than try to work out how much tax a company owes for each locality they can instead use a CSP (certified service providers). In addition, "the states that are in compliance with SSUTA (Member States) will offer advantages to those sellers who use a CSP. Four companies, SpeedTax,Avalara, Exactor, and Taxware, have been designated Certified Service Providers for the SST project.

One such advantage is that the states will offer amnesty "from assessment for uncollected or unpaid sales or use taxes together with interest or penalty for sales made during the period the seller was not registered in that state." Effective June 1, 2006 the Executive Committee of the Streamlined Sales Tax Governing Board has determined that there are adequate Certified Service Provider and Certified Automated System services available.

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Harmonized Sales Tax

In Canada, the Harmonized Sales Tax (HST) combines the Goods and Services Tax (GST) and Provincial Sales Tax (PST) into a single sales tax.

The first attempt at creating a harmonized sales tax was in Saskatchewan shortly after the GST was introduced in 1991. The Progressive Conservative government under Premier Grant Devine harmonized its existing PST with the GST - ostensibly to make tax collection easier for merchants. The harmonization proved to be immensely unpopular.

The GST itself was very unpopular at the time and perhaps more importantly the federal tax was charged on many items the Saskatchewan PST was not (such as restaurant meals); harmonization was therefore seen as a tax grab. In the general election of that year, the New Democratic Party under Roy Romanow promised to reverse the harmonization—this promise likely contributed to their landslide victory. Saskatchewan's NDP government did not propose re-harmonizing the sales taxes while in office, although they did significantly increase the number of items covered by their own sales tax during their time in power.

In 1996, three Atlantic provinces with Liberal governments—New Brunswick, Newfoundland, and Nova Scotia—agreed with the federal government to create a new Harmonized Sales Tax. To make this new tax more palatable to the public, the provinces all agreed to lower their sales tax rates to eight percent. The result was a 15% combined tax when the federal rate of seven percent was added. The new tax went into effect on April 1, 1997. The HST is collected by the Canada Revenue Agency, which then remits the appropriate amounts to the participating provinces. As of 1 July 2006, the GST was lowered to 6%, resulting in a combined HST of 14%. Effective 1 January 2008, the GST was further lowered to 5%, resulting in a combined HST of 13%.

As of 2009, the HST remains in effect in the three Atlantic provinces where it was first introduced, although all three provinces have elected Progressive Conservative governments since that time. The other provinces continue to have separate GST and PST taxes (except Alberta, which has no PST). Among other problems, different legislation at the federal and provincial levels means that some goods are subject to GST but not PST or vice versa, and a single tax cannot cover such a situation. To make matters more confusing, Quebec (7.5%) and Prince Edward Island (10%) charge their PSTs on the GST.

Although the benefits in terms of simplifying sales tax collection are obvious, ongoing jurisdictional disputes between the federal and provincial levels of government mean that most provinces are loath to give up their legislative power to decide which goods are subject to PST.

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Source : Wikipedia