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Sales tax creates more unnecessary pain than value added tax

dyno-might.github.io

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Re: Sales tax creates more unnecessary pain than value added tax

#141

Post by gnicholas »

rgbrenner wrote: post #135
dyno-might wrote: post #66

Earlier quoted context omitted.

Author here. I very much appreciate your polite tone! I'm aware that taxes on items for resale aren't treated like in the toy model. (This is mentioned in the article already.) Can you please take a look at this article and let me know if it changes your view: https://www.cost.org/globalassets/cost/state-tax-resources-p...

Thanks for the interesting link. I've read it and here are my thoughts: - The paper talks about business inputs, which is anything a business purchases. Businesses need to pay sales tax on items, unless they are intended for resale. So they're going to be charged sales tax for the coffee machine for the break room for example. - I disagree that sales tax is a "household consumer"-only tax. It's just a consumption tax…

> It's just a consumption tax.

FWIW, many/most states exempt services, so sales taxes are generally much more limited than a true consumption tax.

Re: Sales tax creates more unnecessary pain than value added tax

#143

Post by adrr »

pxeboot wrote: post #119

> The US has sales tax Something like 25-30% of the US (by area) does not have any sales tax at all [1]. [1] https://www.thebalance.com/states-without-a-sales-tax-319330...

Sales tax is by state. Supporting VAT by state for ecommerce would be a nightmare.

Re: Sales tax creates more unnecessary pain than value added tax

#144

Post by gnicholas »

This post doesn't mention the main reason (in tax policy circles) that sales tax is seen as preferable to a VAT, which is that consumers know how much money is going to the government. With a VAT, you don't know, and it's easy for the government to increase the VAT without purchasers realizing it. In fact, VATs are sometimes referred to as "money machines" — as in, you can just crank them up to generate more tax revenue.

Sales tax, on the other hand, is more salient because product prices are typically shown pre-tax. That means that when you buy something, you know how much of your money is going to sales tax, and people would realize if all of a sudden their $10 purchases were costing $12 with tax instead of $11.

Re: Sales tax creates more unnecessary pain than value added tax

#145

Post by imhoguy »

joefourier wrote: post #120
TazeTSchnitzel wrote: post #65

Earlier quoted context omitted.

No, you must pay VAT on intra-EU B2B transactions too. The accounting is more complicated because the buyer pays rather than the seller, but it is still there.

You don't pay VAT on intra-EU B2B transactions; the buyer adds the VAT amount at their country's rate to both the amount to pay and the amount to claim back, cancelling it out.

This, reverse charge.

Re: Sales tax creates more unnecessary pain than value added tax

#146

Post by wodenokoto »

gnicholas wrote: post #144

This post doesn't mention the main reason (in tax policy circles) that sales tax is seen as preferable to a VAT, which is that consumers know how much money is going to the government. With a VAT, you don't know, and it's easy for the government to increase the VAT without purchasers realizing it. In fact, VATs are sometimes referred to as "money machines" — as in, you can just crank them up to generate more tax reve…

No. There is nothing inherent about sales tax that makes written prices shown pre tax.

In Japan pre VAT prices are regularly advertised to consumers. In Denmark receipts shows percent and nominal VAT of every purchase.

There is nothing defining to sales tax that makes it impossible to have sales tax and requires retailers to advertise post tax prices.

Re: Sales tax creates more unnecessary pain than value added tax

#147

Post by PeterisP »

telaandrews2 wrote: post #108

I lead product for one of the leading US sales tax solutions, and have also built products automating EU VAT solutions. I came into these roles with little subject matter expertise, but with enthusiasm for making it easier for small businesses to thrive. So, take these inputs with that perspective, please. VAT tax rate calculations are trivial, but filing returns is complex. Sales tax calculations are complex, and so…

One way to simplify sales tax without destroying the funding of local governments is to have the relevant portion of sales tax flow to the local governments while removing their ability to set rates and rules on the sales tax - so they get equitable funding, but it's uniform across neighbouring municipalities, and a business can ignore the complexity of how the tax is allocated between various levels of government. This obviously has a political impact and would cause local resistance, though, so it has to be pushed on from above.

Re: Sales tax creates more unnecessary pain than value added tax

#148

Post by liversage »

gnicholas wrote: post #144

This post doesn't mention the main reason (in tax policy circles) that sales tax is seen as preferable to a VAT, which is that consumers know how much money is going to the government. With a VAT, you don't know, and it's easy for the government to increase the VAT without purchasers realizing it. In fact, VATs are sometimes referred to as "money machines" — as in, you can just crank them up to generate more tax reve…

I'm confused by your statement that consumers don't know how much they are taxed by VAT.

I live in a country where the VAT is 25%. If I want to know the VAT of a price I just divide by 5 (the price is 125% of the untaxed price so I need to divide by 5 to determine how much 25% is). By law you always have to provide the price including VAT to consumers so people are aware of the actual cost.

This VAT has not changed for a very long time but if it were to increase (perhaps for good reasons) there would be an outrage. This tax is not being increased without people noticing.

On the other hand decreasing VAT is also not going to happen (even if it might be beneficial). A single point decrease would create a huge budget deficit that would be really hard to cover by other means.

Re: Sales tax creates more unnecessary pain than value added tax

#149

Post by Fnoord »

peteretep wrote: post #127
Fnoord wrote: post #74

Earlier quoted context omitted.

That is how it works in The Netherlands as well. What is also great: all products targeted at consumers must contain VAT price. If it isn't mentioned, it is assumed it includes VAT. They don't get away with "oh sorry, forgot to mention VAT" at checkout. Contrast that to every time I buy something from USA its like "oh, you gotta pay your duties" bwam extra ~20+% on price , and all prices in online discussions which a…

> What is also great: all products targeted at consumers must contain VAT price. Took this far through the comments to get there. There’s a lot of competition for “the worst thing about America”, but it tops my personal list.

(Also @int_19h)

The mandatory tipping culture is another one. If it is mandatory, add it in the price. Tips should be earned. At least in Europe I know what to expect upfront.

The imperial system is another. Makes it unnecessary difficult to convert units.

Its difficult to change such illogical customs though. They're deeply ingrained in the culture, which is in many ways a dominant culture.

Re: Sales tax creates more unnecessary pain than value added tax

#150

Post by penguin_booze »

Rather silly question - perhaps someone can help:

I get a mechanic to repair my car; he charges me for labour, and VAT (20%) on top. The VAT he charges me, he pays that to the Government.

I render my services as a software engineer, and I must pay income tax (~40%), and not VAT.

How's my income different to the mechanic's income w.r.t. the kind of tax we pay? Or does the mechanic also pays income tax additionally?

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