Stupid question about taxes

[Toad82]

I been reading on a HR Bill that would change income tax to a sales tax. I am from Oregon and we don’t have a sales tax, so I was just wondering how a sales tax works for day to day, month to month living. Also, do you also have an income tax?

Basically I am trying to figure out how complicated a sales tax is. I assume it is just a percent added on.


RJ:lokai:

[allbimyself]

Sales tax is added at the time of purchase or sale (hence the name). If the sales tax is 5% and you buy a $10 item, you pay the retailer $10.50 and the retailer must submit 5% of all sales to the taxing authority on a periodic basis.

This is not to be confused with a VAT (value added tax) which is a much more insidious method of taxation.

With a sales tax, the tax is only collected at the point of retail sale. It is not collected at wholesale or manufacture.

A VAT tax is THEORETICALLY similar except it ends up adding more to the cost of the item than just the tax. VAT must be collected at each point that a value is added to a product (hence value added tax). During each phase of manufacture, tax is collected and paid on everything that goes into a product. Take a hammer for instance. It consists mainly of steel and wood. Iron ore, coal, chromium, etc are mined and sold to a steel mill (which pays the VAT tax for the cost paid). The steel mill sells steel to the hammer manufacturer, which pays VAT to the steel mill, deducting VAT already paid to the mining companies. The hammer is manufactured (with additional VAT paid to lumber companies for the wood to make the handle) and sold to a wholesaler, again VAT is collected on the total sold minus VAT already paid. So on down the line until you purchase the hammer.

Now, you might think that if the VAT was 5% the total cost of the hammer would be the same as if you had a 5% sales tax but you'd be wrong. Even tho VAT is collected at each step ONLY on the "value added" portion, the accounting costs to the various enterprises involved of keeping track of all the VAT paid where and when adds anywhere from 20-50% of the VAT as well. So a 5% VAT adds 6-8% to the cost of the item but the taxing authority (the government) only really gets 5%.

So why would a taxing authority want a VAT vs a sales tax? Perception. Sales tax has a reputation as being unfair as everyone pays the same amount no matter income level. Also, since "everyone" pays the tax down the line, many consumers THINK they are only paying the VAT of the final portion of the items cost, i.e. the markup the retailer makes. Obviously this isn't true since the VAT, like any other expense a business has in manufacturing a product is passed on in the cost of the product.

Anyway, due to that, politicians LOVE value added taxes as the public perception of a VAT vs a sales tax is better AND the taxing authority gets money sooner, at every step when something is purchased, even wholesale, rather than waiting to the final retail sale to collect a sales tax.

[MaybeSayMaybe]

Wow. That actually makes sense. Perhaps you could also give us some insights into the beloved use tax.

[allbimyself]

A use tax is simply a way to recover sales tax on items purchased from outside the taxing authority's jurisdiction.

Say you live in NY and purchase an item on the Internet from an out of state retailer. If the retailer does not have locations in NY and is not registered in NY, it is not subject to collecting sales tax from NY consumers. However, being a resident of NY, you are subject to those taxes and are required by law to pay 8% use tax (the same rate as the NY state sales tax) to the state of NY when you pay your income tax. When, where and how use tax is paid in other states varies.

Use tax covers all purchases a resident makes outside the state of residence, whether purchased online, by phone, mail order or in person, if the item purchased is returned to the state of residence (if you buy something that is not used or consumed in your home state it is not subject to use tax) and is something that is subject to sales tax in that state (i.e. most food items wouldn't be subject to use tax in NY). If the purchase is made in person, say on vacation, and you pay sales tax to the taxing authority where purchased, that sales tax paid can be deducted from the use tax.

[dickhand]

I happen to support the sales tax over the income tax myself . Whatever the figure used would be used for everything purchased . Lets say 10% . You want to buy Delmonte vegitables for $ 1.25 instead of store brand for $ 0.50 , then you pay $ 0.12 tax instead of $ 0.05 tax . If you want to buy a rolls royce for $ 300,000.00 then you pay $ 30,000.00 tax on it . If I want to buy a 2nd hand ford focus for $ 5,000.00 then I pay $ 500.00 tax . If you want to buy the latest electronic equipment as soon as it comes out , more power to ya . I'll make do with the same T.V. for 10 years . Who pays more tax ? The one who spends the most . It would encourage saving . You want to pay less tax then buy cheaper stuff or make do with what you got .

[darkeyes]

Aaaahh guddie.. abolish income tax an hav a sales tax..a dead cert way 2 make the rich MUCH richer an the rest a bloody site MORE poor.. bad enuff we hav a mixture a direct an indirect taxation we suddenly get rid a the direct tax?? God.. sum peeps wer born wivout brains indeed....like turkeys votin for Crimbo..

[Hephaestion]

Stick to income tax, and exponentially graduated at that, and never ever let a female Prime Minister who once specialised in selling extra air in ice-creams remove it for a reduced flat rate in the expectation that there will be a trickle down benefit to the rest of the country. Self indulgent blow outs result followed by financial crashes. To make up for the shortfall in tax revenue, anything that is or is not nailed down is sold off.

Apparently she was following a US spawned business model which was first tried out in Chile. I wonder if Chile has spawned as many useless overpaid idiots called management.

And the poor just get poorer!

It's the same the whole world over,
Isn't it a bloody shame?
It's the rich what gets the pleasure
It's the poor what gets the blame / pain (you choose)


.

[darkeyes]

It's the same the whole world over,
Isn't it a bloody shame?
It's the rich what gets the pleasure
It's the poor what gets the blame / pain (you choose)


.
...aint that a fact Heph me luffly...wiv a lil Fran arrangement on the song wich me used 2 sing in clubs n pubs in me folk singin days..

It's the same the whole world over
Ain't it all a bloody shame
It's the rich what gets the pleasure
It's the poor what gets the blame
Those poor sods don't get no pleasure
They just cop the fucking pain...:(

kissie..:)

[Toad82]

Sales tax is added at the time of purchase or sale (hence the name). If the sales tax is 5% and you buy a $10 item, you pay the retailer $10.50 and the retailer must submit 5% of all sales to the taxing authority on a periodic basis.

This is not to be confused with a VAT (value added tax) which is a much more insidious method of taxation.

With a sales tax, the tax is only collected at the point of retail sale. It is not collected at wholesale or manufacture.

A VAT tax is THEORETICALLY similar except it ends up adding more to the cost of the item than just the tax. VAT must be collected at each point that a value is added to a product (hence value added tax). During each phase of manufacture, tax is collected and paid on everything that goes into a product. Take a hammer for instance. It consists mainly of steel and wood. Iron ore, coal, chromium, etc are mined and sold to a steel mill (which pays the VAT tax for the cost paid). The steel mill sells steel to the hammer manufacturer, which pays VAT to the steel mill, deducting VAT already paid to the mining companies. The hammer is manufactured (with additional VAT paid to lumber companies for the wood to make the handle) and sold to a wholesaler, again VAT is collected on the total sold minus VAT already paid. So on down the line until you purchase the hammer.

Now, you might think that if the VAT was 5% the total cost of the hammer would be the same as if you had a 5% sales tax but you'd be wrong. Even tho VAT is collected at each step ONLY on the "value added" portion, the accounting costs to the various enterprises involved of keeping track of all the VAT paid where and when adds anywhere from 20-50% of the VAT as well. So a 5% VAT adds 6-8% to the cost of the item but the taxing authority (the government) only really gets 5%.

So why would a taxing authority want a VAT vs a sales tax? Perception. Sales tax has a reputation as being unfair as everyone pays the same amount no matter income level. Also, since "everyone" pays the tax down the line, many consumers THINK they are only paying the VAT of the final portion of the items cost, i.e. the markup the retailer makes. Obviously this isn't true since the VAT, like any other expense a business has in manufacturing a product is passed on in the cost of the product.

Anyway, due to that, politicians LOVE value added taxes as the public perception of a VAT vs a sales tax is better AND the taxing authority gets money sooner, at every step when something is purchased, even wholesale, rather than waiting to the final retail sale to collect a sales tax.

Thank you for the response. I definitely see how a sales tax would help those with more money and hurt those with less. Its funny I spent over two hours reading about a national sales tax and I don’t remember VAT being brought up at all. They seem like they would go hand in hand.

Two questions for you though. Do you have a income tax and a sales tax? And do you do this for a living or do you just know a lot about it?

[Hephaestion]

To the VAT knowledg(e)able.

Is VAT not something that only the EU indulges in i.e. it is a Federal Euro-tax by any other name? (a Federal Europe now there's a controversial topic)

Once rated for VAT in the EU something can never escape it, it can only become zero rated?

If a firm is big enough to collect VAT on behalf of the Govt can it not claim its own contributions back?

In the UK aren't VAT inspectors members of HM cutoms and Excsie who may commandeer the police and carry guns especially if they don't like the drawings in your colouring in book.

Da da da da da da da da VATman! and Robin (us again)

.

[jamieknyc]

To the VAT knowledg(e)able.

Is VAT not something that only the EU indulges in i.e. it is a Federal Euro-tax by any other name? (a Federal Europe now there's a controversial topic)

Once rated for VAT in the EU something can never escape it, it can only become zero rated?

If a firm is big enough to collect VAT on behalf of the Govt can it not claim its own contributions back?

In the UK aren't VAT inspectors members of HM cutoms and Excsie who may commandeer the police and carry guns especially if they don't like the drawings in your colouring in book.

Da da da da da da da da VATman! and Robin (us again)

.

The EU is the principal region for VAT, but there are others. One of the main reasons for the VAT is that it is far easier for rich taxpayers to avoid paying income taxes in the EU than it is in the United States.

VAT is also popular with the tax authorities because it is quickly and easily collected from manufacturers. Sales taxes are collected from retail merchants, which works if you are collecting from Wal-Mart or Target, but are extremely difficult to collect from mom-and-pop stores that deal mostly in cash. Also- and this is important- in the United States sales tax cannot be collected from on-line sales.

[allbimyself]

The EU is the principal region for VAT, but there are others. One of the main reasons for the VAT is that it is far easier for rich taxpayers to avoid paying income taxes in the EU than it is in the United States.

VAT is also popular with the tax authorities because it is quickly and easily collected from manufacturers. Sales taxes are collected from retail merchants, which works if you are collecting from Wal-Mart or Target, but are extremely difficult to collect from mom-and-pop stores that deal mostly in cash. Also- and this is important- in the United States sales tax cannot be collected from on-line sales.
Not quite. Sales tax IS collected if the item is shipped to a state in which the seller is subject to the taxing authority. An item not subject to sales tax because the seller is not subject to the taxing authority of the buyer's state would be subject to use tax if the buyer's state has use tax.

[allbimyself]

Thank you for the response. I definitely see how a sales tax would help those with more money and hurt those with less. Its funny I spent over two hours reading about a national sales tax and I don’t remember VAT being brought up at all. They seem like they would go hand in hand.

Two questions for you though. Do you have a income tax and a sales tax? And do you do this for a living or do you just know a lot about it?

When Clinton was president he proposed a national VAT but it didn't go anywhere.

In NY we have sales, use, income and property taxes (along with many, many others). Just know a lot about it thru running my own business.

[jamieknyc]

Not quite. Sales tax IS collected if the item is shipped to a state in which the seller is subject to the taxing authority. An item not subject to sales tax because the seller is not subject to the taxing authority of the buyer's state would be subject to use tax if the buyer's state has use tax.

I stand corrected, you are right.

For the benefit of the others: if you order on line from a vendor that comes from your state, or is doing brick-and-mortar business in your state, that order is subject to sales tax. On-line sales to out of state customers are otherwise not taxable. Vendors who do all of their business on line try to operate from states that do not have a sales tax. Sometimes this is grossly unfair: if you order a book from Amazon.com, there is no sales tax, but if you order from Barnesandnoble.com, it is, because Barnes & Noble has brick-and-mortar stores as well.

To make the system more complicated, sales tax laws are inconsistent. If you buy a $150 clothing item at Macy's in New York, it is taxed, but if you buy the same item at a suburban branch store of Macy's in New Jersey, it isn't.

[Doggie_Wood]

A VAT tax is THEORETICALLY similar except it ends up adding more to the cost of the item than just the tax. VAT must be collected at each point that a value is added to a product (hence value added tax). During each phase of manufacture, tax is collected and paid on everything that goes into a product. Take a hammer for instance. It consists mainly of steel and wood. Iron ore, coal, chromium, etc are mined and sold to a steel mill (which pays the VAT tax for the cost paid). The steel mill sells steel to the hammer manufacturer, which pays VAT to the steel mill, deducting VAT already paid to the mining companies. The hammer is manufactured (with additional VAT paid to lumber companies for the wood to make the handle) and sold to a wholesaler, again VAT is collected on the total sold minus VAT already paid. So on down the line until you purchase the hammer.
(scratches head - how cornfusing)
Now, you might think that if the VAT was 5% the total cost of the hammer would be the same as if you had a 5% sales tax but you'd be wrong. Even tho VAT is collected at each step ONLY on the "value added" portion, the accounting costs to the various enterprises involved of keeping track of all the VAT paid where and when adds anywhere from 20-50% of the VAT as well. So a 5% VAT adds 6-8% to the cost of the item but the taxing authority (the government) only really gets 5%.



So - the other 2% or 3% is lost in the paperwork, huh? :rolleyes::cool:

[chuck1124]

Allbi.........I am guite impressed. Yes, you are quite an intelligent person. Seems most states have both sales and income taxes. Fortunately, here in Delaware, we only have the income tax. The thing with the income tax, however, is that is a means to direct society. If you want more of something, give it a tax break, less of something, tax it heavily. Want to buy votes, give a tax refund to the 60% of Americans that don't pay taxes.

[allbimyself]

So - the other 2% or 3% is lost in the paperwork, huh? :rolleyes::cool:
Goes to accountants and clerks that have to prepare and file all the extra paperwork AND to cover the additional expense the gov't has in processing it all -- clerks, auditors and investigators to enforce it.

[Doggie_Wood]

Allbi.........I am guite impressed. Yes, you are quite an intelligent person. Seems most states have both sales and income taxes. Fortunately, here in Delaware, we only have the income tax. The thing with the income tax, however, is that is a means to direct society. If you want more of something, give it a tax break, less of something, tax it heavily. Want to buy votes, give a tax refund to the 60% of Americans that don't pay taxes.

`Ole! and touche'
very well phrased Chuck

Doggie :doggie:

[darkeyes]

Allbi.........I am guite impressed. Yes, you are quite an intelligent person.
Glad ya sed 'e wos only quite intelligent Chucky duckie... fact that 'e disagrees wiv me as much as 'e dus means "quite" mus remain wen attachin the word "intelligent" 2 Allbi.. is an improvement tho.. cuppla years go only description me used 2 use bout 'im wos "effin cheeky arrogant b*****d".. now me jus thinks 'e is a quite intelligent luffly cheeky sumtimes arrogant b*****d wiv a nice sensitive side 2 'im.. oo soz Allbi.. that ruinya image??? tee hee.. kissie..:tong::bigrin:

[allbimyself]

Glad ya sed 'e wos only quite intelligent Chucky duckie... fact that 'e disagrees wiv me as much as 'e dus means "quite" mus remain wen attachin the word "intelligent" 2 Allbi.. is an improvement tho.. cuppla years go only description me used 2 use bout 'im wos "effin cheeky arrogant b*****d".. now me jus thinks 'e is a quite intelligent luffly cheeky sumtimes arrogant b*****d wiv a nice sensitive side 2 'im.. oo soz Allbi.. that ruinya image??? tee hee.. kissie..:tong::bigrin:LOL Fran. I see our roles as reversed. You are quite intelligent when you agree with me, the rest of the time not so much. But you are a little hottie so that makes up for it.

[darkeyes]

LOL Fran. I see our roles as reversed. You are quite intelligent when you agree with me, the rest of the time not so much. But you are a little hottie so that makes up for it.
Muah... ya ole smoothie..:tong:

[open2both]

I'm a democrat but I'm changing "parties."
These extortionist taxes will hurt EVERYBODY an NOTHING will get better!!!





I been reading on a HR Bill that would change income tax to a sales tax. I am from Oregon and we don’t have a sales tax, so I was just wondering how a sales tax works for day to day, month to month living. Also, do you also have an income tax?

Basically I am trying to figure out how complicated a sales tax is. I assume it is just a percent added on.


RJ:lokai:

[Biguybob]

If were talking about taxes. I found it useful

Let's put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for beer and the bill for
all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go
something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with
the arrangement, until on day, the owner threw them a curve.
"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20."Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes
so the first four men were unaffected. They would still drink for free. But
what about the other six men - the paying customers? How could they
divide the $20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted
that from everybody's share, then the fifth man and the sixth man
would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each
man's bill by roughly the same amount, and he proceeded to work out the
amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four
continued to drink for free. But once outside the restaurant,

the men began to compare their savings.

"I only got a dollar out of the $20,"declared the sixth man. He
pointed to the tenth man," but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a
dollar, too. It's unfair that he got ten times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $10 back
when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get
anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine
sat down an d had beers without him. But when it came time to pay
the bill, they discovered something important. They didn't have
enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
&nb sp; Professor of Economics
University of Georgia

**For those who understand, no explanation is needed. For those who
do not understand, no explanation is possible.

[jamieknyc]

You left out an important piece of information in that beer story. The first four men don't have any money, the fifth and six are working Joes, numbers six through nine are middle-class, and the tenth man received a multimillion dollar bonus even though his company just had to be bailed out by the taxpaers.

[darkeyes]

You left out an important piece of information in that beer story. The first four men don't have any money, the fifth and six are working Joes, numbers six through nine are middle-class, and the tenth man received a multimillion dollar bonus even though his company just had to be bailed out by the taxpaers.

Me Granpa had a sayin Jamie.. "2 them that have.. it shall be given.. 2 them that have not..it shall be taken away...".

[jamieknyc]

Me Granpa had a sayin Jamie.. "2 them that have.. it shall be given.. 2 them that have not..it shall be taken away...".

Slow down, a large part of why the tenth man's company needs a bailout is because it is paying numbers 1 through 6 $80 an hour between salary and benefits, and because numbers 7 though 9 have been living beyond their means and buying more of the tenth man's product that they can really afford.

[darkeyes]

Slow down, a large part of why the tenth man's company needs a bailout is because it is paying numbers 1 through 6 $80 an hour between salary and benefits, and because numbers 7 though 9 have been living beyond their means and buying more of the tenth man's product that they can really afford.

An so everythin nos 7-9s fault principally an 2-6 for earnin decent money an not no 1's?? Waya the world throughout history.. blame the plebs.. blame the workers.. blame the poor an unemployed.. nev blame the bosses.. nice generous benevolent bosses.. yea.. rite..

[jamieknyc]

One of the reasosn that the present crisis is so sever is that people like you refuse to recognize their own role in creating it.

[darkeyes]

One of the reasosn that the present crisis is so sever is that people like you refuse to recognize their own role in creating it.We all had a role in creatin it Jamie don deny it.. but like mos every 1 else me jus tried 2 liv as best me cud wiv the resources available 2 me.. but wosn me that created the conditions wich brot the whole housa cards crashin down.. wosn me or peeps like me that loaned out dosh willy nilly 2 peeps that cudn afford it.. wosn me that allowed banks an financial institutions 2 think the world wos ther own personal fiefdom 2 do wiv as they please... hav fought that kinda thinkin alla me adult life an a lil b fore.. an will for the rest a me life even more so now..an wile me has me own shara responsibility its pretty minor compared 2 the obscene way capitalism an its power brokers operated ova the last cuppla decades especially an b fore.. yea Jamie.. play the blame the game an blame the lil peeps for the stupidity a bankers, politicians an big biz... well me luffly.. as usual nowt ya sez stands up 2 the slitest scrutiny.. an everythin ya sez shows ya hav as much undastandin a this world as ya hav a wot goes on in the middle of a black hole.. lil guffy statements an as usual not a soddin word 2 bak ne of 'em up..

[totchune]

Allbi.........I am guite impressed. Yes, you are quite an intelligent person. Seems most states have both sales and income taxes. Fortunately, here in Delaware, we only have the income tax. The thing with the income tax, however, is that is a means to direct society. If you want more of something, give it a tax break, less of something, tax it heavily. Want to buy votes, give a tax refund to the 60% of Americans that don't pay taxes.

Taxes on wages are actually Unconstitutional in the US. Even though the IRS won't tell you this because their role is to scare and bully the population in order to collect revenues, paying income taxes is VOLUNTARY. Check it out.

There were no taxes on wages in the US before the first world war.

Watch the movie: "America: freedom to fascism"...It's an eye opener!

[totchune]

And the poor just get poorer!

It's the same the whole world over,
Isn't it a bloody shame?
It's the rich what gets the pleasure
It's the poor what gets the blame / pain (you choose)


The trickle down economic policy of the conservatives is nothing more than a leaky sewer pipe!