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> This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income It d

by kshri24 9mo ago

> This isn't really any different than any other kind of taxes. You pay income tax and then pay sales tax using the money that was already taxed as income It definitely does make a huge difference. From sibling comment I got to know US does not even have VAT. It only makes the situation worse as the businesses operating in US cannot offset input credits against their output liability as Sales Tax has no such concept. So you are paying tax-on-tax-on-tax all the way to your raw materials that have been imported APART from paying tariffs. No wonder prices are so jacked up in US and to compensate that, you all have inflated salaries. The US Government is fleecing its citizens dry. Please study how VAT/GST works in EU/India/Australia and compare it with Sales Tax regime in US and you will know why Sales Tax is so bad. > Meanwhile how many times something is taxed isn't really the relevant thing. It's, how much in total are you paying in taxes? If you pay ~10% three times, that's not really any worse than paying ~33% once. It is, of course, worse than paying 10% once. You are not paying 10% three times. Assuming raw material was imported at $X + %10 of $X (tariff is 10%), value add was say $10, then the IRS is collecting say sales tax of 10% of the total value: 10 % of (($X + %10 of $X) + $10). Now this is just the simplest chain where raw material -> imported by manufacturer -> sold directly to consumer. But that is not how it is done. You typically buy from a retailer who buys from a dealer who buys from a wholesaler/manufacturer. So that would be 10% every time ON THE FULL VALUE (not just on value added). To demonstrate a simple raw material -> imported by manufacturer with value added -> sold to dealer/distributor -> sold to retailer -> sold to customer, this is what it would look like: 1. Imported by manufacturer: $X + %10 of $X 2. Value added ($10) and sold to dealer/distributor: 10 % of (($X + %10 of $X) + $10) 3. Dealer stocking/shipping charges added (say $10 again) and sold to retailer: 10% of (10 % of (($X + %10 of $X) + $10) + $10). 4. Retailer stocking/service charges added (say $10 again) and sold to consumer: 10% of (10% of (10 % of (($X + %10 of $X) + $10) + $10) + $10). The longer the chain, the more tax-on-tax you are paying (in some cases the total final tax can even go above the actual cost of making the product). This nonsense is solved by VAT/GST where the tax you pay for acquiring raw material or processed inputs comes back to you as input credits, which you can use to offset your output tax liability. There is no compounding of tax in VAT/GST. EDIT: added an example for more clarity

hnburnsy 9mo ago
Wrong on so many accounts, including the IRS and where in the supply chain that sales tax is applied.
- kshri24 9mo ago
  My answer is based on typical definition of what sales tax is. I have no idea how it is actually implemented in US and how it avoids tax pyramiding and if it actually can or not. But I know for a fact that ST has no concept of input tax credits unlike VAT/GST. EDIT: Turns out US sales tax indeed works like I described above [1]. There are definitely some instances where B2B sales can be exempt from paying sales tax but it does not seem to be pervasive enough to be worth highlighting: because supposedly 40% of business transactions are taxed at intermediate stages (are paying sales tax at every stage). Quoting from article: "Some studies estimate that around 40% of the total sales tax revenue comes from taxes levied on business-to-business sales." [1]: Reference: https://www.fonoa.com/resources/blog/vat-vs-sales-tax-where-the-difference-hides#:~:text=Instead%2C%20sales%20tax%20operates%20with,business%2Dto%2Dbusiness%20sales. https://www.fonoa.com/resources/blog/vat-vs-sales-tax-where-...
  - AnthonyMouse 9mo ago
    > because supposedly 40% of business transactions are taxed at intermediate stages (are paying sales tax at every stage) That's not what that says. If a business buys office furniture because it wants to furnish their offices rather than because they're in the business of selling office furniture then they pay sales tax on it even though it's a "business-to-business" transaction. This isn't any different than when they buy real estate so they have offices and then pay property tax on it. They're the end customer and the end customer pays the tax. This results in "double taxation" (they pay the tax on the furniture, they pass the cost on to their customers as higher prices, the customers pay more tax on the higher prices), but that's the same as any other overlapping set of taxes. What it doesn't do is cause longer supply chains to pay more in taxes, because that's the case where they can get the exemption when they're buying something for resale.

by kshri24 9mo ago

hnburnsy 9mo ago

Wrong on so many accounts, including the IRS and where in the supply chain that sales tax is applied.

kshri24 9mo ago
My answer is based on typical definition of what sales tax is. I have no idea how it is actually implemented in US and how it avoids tax pyramiding and if it actually can or not. But I know for a fact that ST has no concept of input tax credits unlike VAT/GST. EDIT: Turns out US sales tax indeed works like I described above [1]. There are definitely some instances where B2B sales can be exempt from paying sales tax but it does not seem to be pervasive enough to be worth highlighting: because supposedly 40% of business transactions are taxed at intermediate stages (are paying sales tax at every stage). Quoting from article: "Some studies estimate that around 40% of the total sales tax revenue comes from taxes levied on business-to-business sales." [1]: Reference: https://www.fonoa.com/resources/blog/vat-vs-sales-tax-where-the-difference-hides#:~:text=Instead%2C%20sales%20tax%20operates%20with,business%2Dto%2Dbusiness%20sales. https://www.fonoa.com/resources/blog/vat-vs-sales-tax-where-...
- AnthonyMouse 9mo ago
  > because supposedly 40% of business transactions are taxed at intermediate stages (are paying sales tax at every stage) That's not what that says. If a business buys office furniture because it wants to furnish their offices rather than because they're in the business of selling office furniture then they pay sales tax on it even though it's a "business-to-business" transaction. This isn't any different than when they buy real estate so they have offices and then pay property tax on it. They're the end customer and the end customer pays the tax. This results in "double taxation" (they pay the tax on the furniture, they pass the cost on to their customers as higher prices, the customers pay more tax on the higher prices), but that's the same as any other overlapping set of taxes. What it doesn't do is cause longer supply chains to pay more in taxes, because that's the case where they can get the exemption when they're buying something for resale.