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Sales tax creates more unnecessary pain than value added tax

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

#51

Post by tobias3 »

polote wrote: post #3

In France when you are a company you don't pay VAT on stuff you buy from other companies, so the main point of the article doesn't work. Because I guess if we had sales tax, companies wouldn't pay it either Edit: My point is that it will not make a company economically more efficient than several companies

If it works the same as in Germany you only pay no VAT if you buy from a company in another EU country as a company.

Therefore the EU has both a sales tax and a VAT depending on if you look at individual countries or the EU as a whole.

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

#52

Post by rgbrenner »

gamblor956 wrote: post #42
gravitas wrote: post #35

Earlier quoted context omitted.

I believe there is a specific situation in that you must have purchased the goods intending resale (see the other reply explaining raw goods) of a further finished good. Buying something as a consumer, (not) using it then reselling it later is taxable.

It's not enough to purchase the goods intending resale; you must also be registered as a reseller. In fact, if you can't provide a reseller's certificate (or license, the exact term depends on the state) then the seller generally must collect a sales tax on the sale.

Correct.. and it's in that specific circumstance: where you are licensed, and for whatever reason the retailer charged you sales tax anyway on an item for resale... then you can file with the state to receive that money back. My point was that there's no reason any retailer or manufacturer would pay sales tax on the inputs for their goods.

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

#53

Post by camhart »

ghgdynb1 wrote: post #24
rgbrenner wrote: post #11

I'm going to take a wild guess and say the author isn't from the US. He includes sales tax on items purchased for resale.... which is an exception in every state that I know of. Even if you purchase an item at retail with sales tax, you can file to receive the money back from the state. Additionally sales tax has nothing to do with whether your supply chain is fully integrated, and hiring all of your suppliers as emp…

I’m going to bookmark this as an example of how to clearly and specifically point out a bunch of issues with a source while maintaining a constructive tone. This type of comment makes HN the best forum for discussion on the Internet.

I agree with this. I wish there was more of it. However it seems to me like this is becoming more and more rare on HN or harder to find by being drowned out.

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

#54

Post by rahimnathwani »

asdfaoeu wrote: post #34
pionar wrote: post #26

Earlier quoted context omitted.

If you're a registered business with a tax ID number, you can deduct sales taxes paid on business inputs (supply) on your income taxes, whether personal or business.

Is that all states? That just sounds like VAT

The comment to which you replied said you can deduct sales taxes paid against income taxes.

I think this means that paying $10 would reduce your income tax by $3 (if income tax is 30%). This is different from getting a 100% credit ($10) which is what you'd get with a VAT system.

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

#55

Post by lotsofpulp »

bearbin wrote: post #25
lotsofpulp wrote: post #10

>Without this exception, we’d probably have a crazy economy where manufacterers sell directly to consumers. What is the problem with this?

Aggregated retail is beneficial to both consumers, because they have a many competitive locations, at each of which then can buy many varieties of good. Similarly this benefits manufacturers, as they can specialise in manufacture rather than retail. Such aggregation increases the efficiency of the economy. Limiting retail would therefore decrease global efficiency, going against the principle that taxes should not in…

I wasn't specifically referring to the concept of exempting resellers from paying sales tax for items they are reselling.

I was questioning the problem of manufacturers selling directly to customers. I prefer to cut out as many middlemen as possible nowadays, in order to ensure the highest probability of getting the highest quality product.

I know Walmart gets lower quality products than other places and whatnot, and manufacturers make subtle adjustments to products to meet resellers' desired price points.

So now, I just buy directly from the brands whenever possible (and definitely not from Amazon for anything high value). I trust Costco's items to have been better vetted and especially Kirkland Signature branded items to be decent, as well as Apple and maybe Nordstroms.

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

#56

Post by gamblor956 »

polote wrote: post #3

In France when you are a company you don't pay VAT on stuff you buy from other companies, so the main point of the article doesn't work. Because I guess if we had sales tax, companies wouldn't pay it either Edit: My point is that it will not make a company economically more efficient than several companies

French businesses still pay VAT on stuff they buy from other companies.

Generally, most VAT systems work this way: Business collects VAT from customers for services or goods sold(output VAT), and must pay it to the government. But businesses may offset that liability with the VAT they paid acquiring goods or services that were used in their own revenue-generating activities (input VAT).

So, for example, ACME sells TNT for $10 and VAT is 10% or $1 (output VAT), so price to customer is $11 and ACME's VAT liability is $1. Say ACME paid $0.25 VAT to its suppliers for the chemicals in the TNT and the paper casing (input VAT). ACME's net tax liability is $0.75, and that is how much they would actually fork over to the government.

Note that if ACME's customer is Bugs' Mining Shop, i.e., a business, they still charge VAT on the transaction.

In a sales tax system, ACME would not have paid sales tax to its suppliers at all, and it would not have charged Bugs' Mining Shop a sales tax. Thus, sales tax is generally more economically efficient than a VAT from a business perspective.

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

#57

Post by rahimnathwani »

rgbrenner wrote: post #11

I'm going to take a wild guess and say the author isn't from the US. He includes sales tax on items purchased for resale.... which is an exception in every state that I know of. Even if you purchase an item at retail with sales tax, you can file to receive the money back from the state. Additionally sales tax has nothing to do with whether your supply chain is fully integrated, and hiring all of your suppliers as emp…

This is a really great explanation. I'm relatively new to the US, and the system of sales tax struck me as odd until I learned about the various reseller and other exemptions.

The complexity (need for so many exemptions) suggests that the fundamental design may be flawed. If you have VAT, you can do with fewer rules.

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

#59

Post by MaulingMonkey »

jmole wrote: post #22
rgbrenner wrote: post #11

I'm going to take a wild guess and say the author isn't from the US. He includes sales tax on items purchased for resale.... which is an exception in every state that I know of. Even if you purchase an item at retail with sales tax, you can file to receive the money back from the state. Additionally sales tax has nothing to do with whether your supply chain is fully integrated, and hiring all of your suppliers as emp…

Where can you file for sales tax reimbursement? Essentially all online resale sites (eBay, Reverb, etc.) are charging sales tax on secondhand goods. So if I buy something, then sell it later, that first purchase should be considered a "resale" purchase, right?

> Where can you file for sales tax reimbursement?

Typically you don't pay in the first place, rather than getting reimbursed (EDIT: AFAIK). It also depends on the state, so I can't give a general answer. To give a concrete example, however, I'll use Washington state:

https://dor.wa.gov/taxes-rates/retail-sales-tax/reseller-per...

And here's a deeper link specifically for the actual action of applying for a reseller's permit, as linked in the sidebar of the above page:

https://dor.wa.gov/taxes-rates/retail-sales-tax/reseller-per...

EDIT: Okay, looks like there are deductions / reimbursement options as well, TIL:

https://dor.wa.gov/taxes-rates/retail-sales-tax/reseller-per...

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

#60

Post by asdfasgasdgasdg »

rgbrenner wrote: post #11

I'm going to take a wild guess and say the author isn't from the US. He includes sales tax on items purchased for resale.... which is an exception in every state that I know of. Even if you purchase an item at retail with sales tax, you can file to receive the money back from the state. Additionally sales tax has nothing to do with whether your supply chain is fully integrated, and hiring all of your suppliers as emp…

There are a number of goods that do have associated sales taxes that apply on any transfer, including some of the most expensive goods Americans buy. Particularly, in many jurisdictions, there are transfer taxes on houses and cars.
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