johneccles wrote:
I cannot understand what happens with this US purchase tax system, here the UK price shown instore or online is what you pay, there are no extra taxes as that is already included, the only extras could be delivery or insurance, the latter being optional.
It's a very neat system but the standard VAT (Value added Tax) is currently 20% so this usually makes the UK more expensive.
In the U.S., there is no VAT. The U.S. Government collects, income and payroll taxes, e.g.; they also collect tariffs on imported goods. Our sales tax systems are very much a state and local domain
As a means of raising revenue, states, counties, and some cities, have resorted to collecting sales taxes on certain goods. In a lot of locales, food and prescription drugs, sometimes newspapers and magazines, are exempt from sales taxes, and generally services (labor) are exempt. Sales taxes are generally collected on the gross amount of the cash register sales total. For example, a sales tax of 6% would collect $6.00 on $100, and the retailer remits directly to the unit of government levying the tax. This works well for brick and mortar stores, not so much mail order and "etail". The various taxing jurisdictions found out years ago, that people would avoid paying sales taxes from out-of-state companies.
As laws now exist, the state of Michigan can't force Ohio to collect Michigan's 6% sales tax on goods shipped to Michigan. The exceptions are stores which have brick and mortar presences in more than one state. If I ordered something from a store in Ohio, and they had a brick and mortar presence in Michigan, they can, and usually will collect sales tax and remit it to Michigan.
In order to try and collect their sales taxes, the states also levy an identical tax referred to as a "Use Tax" on goods consumed locally, but purchases out of state. States have resorted to an honor system when residents file state returns, to collect the use tax on goods bought out of state and consumed in state. This works, but to a minimal extent. There is little the state can do, if one denies that goods were purchased out of state, but consumed in state.
The several states while "United", are very disjointed when it comes to helping each other when it comes to collecting sales and use taxes.
There is resistance to universal collection of sales taxes. Congress cant interfere with state and local taxes, and maybe turn the collection of sales and use taxes into another Federal bureaucracy. Some states are clamoring for Federal help. There is no mandate in the U.S. Constitution, and even Congress is loath to get involved.
If this sounds complicated, believe me, it is. In my prior life as an accountant, I was a subject matter expert on sales and local taxes, and it's a very complicated matter.