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Understanding the Details of Sales Tax

Regular Sales

In general, sales taxes are that which accompany the buying and selling of goods. A sales tax is imposed upon aspects related to areas of consumption, to be more specific. Most states impose sales taxes as payment to both state as well as federal government. The responsibility of collecting sales taxes falls upon the shoulders of the merchant or vendor who is selling goods and services. One distinction exists as well, however, that which specifies that "resellers" be exempt to sales taxes as long as they, themselves, did not make use of items up for resale.

In order to guarantee such exemption in some locales, individuals must produce a "reseller's certificate." The federal government also sets forth limitations where states may only impose such tax policies upon their residents as areas of "interstate commerce," for instance are left for the governments determination. In the event of the absence of a sales tax, another cost may be incurred, such as that of a "use tax."

Aside from sales tax associated to general retail, which accompanies the final purchase by the consumer, there exist additional categories of sales taxes. In specific terms, sales taxes may be divided into a number of categories. These include "gross receipts taxes," "excise taxes," the aforementioned "use tax," "value added taxes," "fair tax," and "turnover tax." Gross receipts taxes are that which are imposed upon business sales. This particular sales tax is often met with contention as some believe it is only a basis for multiple taxation practices. Excise taxes are placed upon certain products only, such as gasoline and alcoholic beverages, for instance.

In addition, they are usually imposed upon the initial producer as opposed to the eventual retailer of such items. A use tax is placed on items that possessed no prior sales tax at the time of purchase. Though they do exist in conjunction with regular sales taxes, they may be a hard sell with consumers aside from those involved in larger scale purchases. Value added taxes are that which are imposed upon every single sale while a fair tax is an example of a potential federal sales tax that would take the place of federal income taxes. Turnover tax, then, exhibits taxes imposed as an "indirect tax."

In general sales taxes vary depending upon the state in which you reside. For example sales tax stands at a rate of 7% with a differing amount when concerning areas specified as "urban enterprise zones." These urban business districts may only entail a sales tax rate of 3.5%.

In addition, the state of New Jersey also places various exemptions on various items, such as that of "unprepared foods" aside from some candy and pet foods, as well as on clothing. However, a sales tax does accompany the purchase of clothing produced from animals' "hides or pelts," which are valued to be in the upwards of $500 or more. Sales tax for such a purchase would garner that of a 6% "Fur Clothing Gross Receipts Tax."

NEXT: Special Sales Excise Tax

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