Everyone files for sales tax either monthly, quarterly or yearly depending on the rules and regulations of the state Department of Revenue or tax agency. There are some businesses who does sales tax filing or sales tax return at the end of the accounting year or the end of the year.
Sales tax is basically a consumption tax which is imposed on you for certain goods and services which you receive or consume. Sales tax is always a certain percentage of an item or products’ value which is then charged at the point of exchange or purchase and the transaction is indirect. Sales tax return is filed for businesses to save some money from the sales tax.
For example, if you are buying a piece of clothing for $100, the sales tax on that product is 8%, then you have to multiply 100 × 0.8, then the sales tax on that product is $8. The total amount payable will be $108 with sales tax included in it.
There are five different types of sales tax. They are:
- Retail Sales Tax
- Manufacturers’ Sales Tax
- Wholesale Sales Tax
- Use Tax
- Value Added Tax (VAT)
There is no national or federal sales tax in the United States (US), there is only state sales tax and local sales tax. Depending on the jurisdiction of the state in which you are, taxpayers may be subjected to property taxes, excise taxes or telecommunication taxes as well. Generally, when a person is selling a ‘tangible personal property’ then they can charge sales tax on the property they are selling to the customers when they sell it.
The states in the United States (US) have to limit the tax to certain services which are specifically enumerated by the statute. Though few of the states of the US charge sales tax on nearly all the goods and services. The sales or the use tax rates varies from state to state depending on the guidelines of the Department of Revenue (DOR) or the tax agency of that state.
Most of the states of the United States (US) rely on the sales tax more than the local governments do. In the year of 2017, the states had collected around $457 billion from the sales tax. So around 35% of their own-source general revenue come from the sales tax.
State Sales Tax Revenue:
The below mentioned table show the state sales tax revenue of the year 2017.
|Revenue (billions)||% of own source general revenue|
|General Sales Tax||300||23|
|Selective Sales Tax||157||12|
|Total Sales Tax||457||35|
Many of the states of the United States (US) also deduct prescription and nonprescription drugs, clothing as well as textbooks from the general sales tax. In the United States, they celebrate sales tax holidays which is a certain period of time, where you can purchase clothes and your school supplies before your school year for tax-free.
The taxation of certain services such as dry cleaning, carpentry work or barbershops, the taxation becomes a bit more complicated. All the states of the US tax some goods and services but they also have certain exceptions to it which are common. So, this is how the states sales tax works.