Sales Tax

Definition

Sales tax is a tax levied on sales of goods and services, calculated as a percentage of the purchase price and collected by the seller.

Purpose

The purpose of sales tax is to generate revenue for governments to fund public services and infrastructure, collected at the point of sale by the seller and remitted to the government.

Examples of Use

• Retail stores add sales tax to the purchase price of goods and remit the collected tax to the state government.
• Service providers, such as hair salons and repair shops, charge sales tax on the services rendered.
• Online retailers calculate and collect sales tax based on the buyer's location, adhering to local tax regulations.

Related Terms

• Value-Added Tax (VAT): A tax on the value added to goods and services at each stage of production or distribution.
• Excise Tax: A tax on specific goods, such as gasoline, tobacco, and alcohol.
• Tax Rate: The percentage at which an individual or corporation is taxed.

Notes

Sales tax rates and regulations vary by jurisdiction, and businesses must stay informed about the applicable rates and compliance requirements.