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What States Implement Consumption Sales Tax

Consumption Sales Tax

The first state to enact a state sales tax was West Virginia. In 1921, West Virginia was the only state to enjoy revenue from a state sales tax. In fact it would be eight years before any other state enacted a state sales tax. Currently, forty five states impose both a state sales tax and a use tax. Sales taxes are usually assessed at the point of purchase of an item, or at any point during the manufacturing of that item.

State sales tax is often paid at several levels during the production of any item and the sales tax rates will vary depending on the state where the purchase is made. Sales tax rates also apply to certain services. A use tax is a tax paid for the use, storage or consumption of an item purchased in another state.

Sales taxes, or consumption taxes, are a taxes placed on the purchase of goods or services. While each state may have different sales tax rates, the state sales taxes are not based on residency. For example, a person from Florida that makes a purchase in New jersey, is still expected to pay New Jersey state sales tax rate on that item. In fact, they would pay the New Jersey sales tax rate when they bought the items in New Jersey. When they took the items home to Florida, they would be expected to pay a use tax, which is a tax on items, used, consumed or stored in a state, other than the one in which it was purchases.

In fact, there are lawsuits which involve state sales taxes, fees and interest on taxes that state governments believes are owed based on records obtained from online retailers. Excise taxes are also a form of sales tax. However, consumers may not be aware of this type of tax as it is often already included in the price of an item, so the sales tax rate is not obvious to consumers.

For example, an individual that purchases bottle of liquor, will likely note the state sales tax. Yet, they have likely paid sales tax on the excise tax that is already imposed on that item. An excise tax is imposed on a certain volume of an item. Liquor may be taxed on a per liter basis. The consumer pays a sales tax on the total price of that liquor, which already includes other taxes.

Sales tax is sometimes paid on the total cost of an item, which can already include other taxes. The lower and middle class often pay a larger percentage of their income towards sales tax. The tax reform movement believes that sales taxes, as they are currently implemented, are unfair. Sales taxes can place an unequal tax percentage on the lowest income families. The rich pay a significantly lower percentage of their income towards sales taxes. Sales tax rates are often unfair because they place unequal tax burdens on taxpayers, as sales tax rates relate to individual salaries.

NEXT: What You Should Know About Estate Tax

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