Sales Tax in United States (USA)

Sales Tax in United States is imposed on the consumption of goods and services.

Sales Tax in United States is imposed on the consumption of goods and services.

Facts about United States Sales Tax:

In United States, sales tax is estimated in each and every state level, excepting Oregon, Alaska, Montana, New Hampshire and Delaware. Hawaii is considered to be the only exceptional case, where sales tax is charged on the commercial activities, rather than on the consumers. In a handful of cases in United States, estimation of sales tax is also done on municipal or county levels. In the absence of national sales tax in America, the Fair Tax Act acts as the best alternative, replacing maximum federal taxes with a nationwide retail sales tax. It is at this time that a monthly tax rebate is also extended to American citizens and legal foreign residents inhabiting America.

The responsibility of collecting American sales tax rests with the merchants, who pass the tax onto the consumers, by adding them with the prices of different goods and services. Normally it is the consumers who are burdened with sales tax. The re-sellers on the other hand, are exempted from sales tax, provided they do not use the goods on which sales tax is levied. In some cases, a certificate on the part of the re-sellers is necessary for them to enjoy this benefit. Sales tax is examined through a process called sales tax audit, where the financial documents of a company are scrutinized by the tax agency on state level to find out whether these companies have collected the right sales tax amounts from their consumers.

Some goods are exempted from sales tax and in such a case the the person who is buying the good is required to pay a use tax at the same rate as sales tax.

Imposition of Sales Tax in different states across United States:

• Florida: In Florida, the rate of sales tax on state level is 6%. Here, sales tax is levied on the rentals or sale of goods, admissions, license, real estates and lease. However, commodities like medicines and groceries are exempted from the payment of sales tax.
   
• Alabama: Alabama has a general sales tax of 4% at the state level. Apart from sales tax, there are also extra local taxes whose amount may combine the total sales tax amount upto 10%, in some American cities like Montgomery. In Alabama, the food products also come under the jurisdiction of state sales tax.
   
• Colorado: Here, the state sales tax is 2.9%, with some counties and cities imposing extra taxes. In Denver, the real tax rate is 3.5%, with additional 4% tax levied on food consumption.
   
• Alaska: Alaska has no sales tax on state level. However, most of the local governments impose upto 7% sales tax at the municipality and borough levels.
   
• Illinois: Sales tax in Illinois comprises four categories, namely the Service Occupation Tax, Use Tax, Retailer’s Occupation Tax and the Service Use Tax. Each of these four types of taxes is under the control of the Illinois Department of Revenue. The Retailer’s Occupation Tax, commonly known as the “Sales tax”, is levied on the retailers. It is measured in terms of the total financial receipts of the individual retailers. The Illinois business class comes under the Service Occupation Tax, which is measured in terms of the sale price of private tangible property transferred for offering a service. Use Tax is levied on consumers, at the time of retail purchase or use of properties. Finally, imposition of Service Use Tax is made when private tangible properties are used or consumed.
   
• California: In California, there is prevalence of sales tax all over the state at the rate of 7.25%. The State Board of Equalization, the only tax commission in the United States elected publicly, collects sales tax in California. The collection of 7.25% sales tax in California is distributed and utilized by departments like the state in general, local county transportation funds, state local public safety fund, state general fund, state fiscal recovery fund, uniform local tax, local county/city operational funds and state local revenue fund.