A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax, such as food, education, and medicines. A value-added tax (VAT) collected on goods and services is related to a sales tax. See Comparison with sales tax for key differences.
FairTax was a single rate tax proposal in 2005, 2008 and 2009 in the United States that includes complete dismantling of the Internal Revenue Service. The proposal would eliminate all federal income taxes, payroll taxes, gift taxes, and estate taxes, replacing them with a single consumption tax on retail sales.
Most individual U.S. states collect a state income tax in addition to federal income tax. The two are separate entities. Some local governments also impose an income tax, often based on state income tax calculations. Forty-two states and many localities in the United States impose an income tax on individuals. Eight states impose no state income tax, and a ninth, New Hampshire, imposes an individual income tax on dividends and interest income but not other forms of income. Forty-seven states and many localities impose a tax on the income of corporations.
A use tax is a type of tax levied in the United States by numerous state governments. It is essentially the same as a sales tax but is applied not where a product or service was sold but where a merchant bought a product or service and then converted it for its own use, without having paid tax when it was initially purchased. Use taxes are functionally equivalent to sales taxes. They are typically levied upon the use, storage, enjoyment, or other consumption in the state of tangible personal property that has not been subjected to a sales tax.
The 1998 Internet Tax Freedom Act is a United States law authored by Representative Christopher Cox and Senator Ron Wyden, and signed into law as title XI of Pub.L. 105–277 (text)(pdf) on October 21, 1998 by President Bill Clinton in an effort to promote and preserve the commercial, educational, and informational potential of the Internet. The law bars federal, state and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. It also bars multiple taxes on electronic commerce.
Sales taxes in the United States are taxes placed on the sale or lease of goods and services in the United States. Sales tax is governed at the state level and no national general sales tax exists. 45 states, the District of Columbia, the territories of Puerto Rico, and Guam impose general sales taxes that apply to the sale or lease of most goods and some services, and states also may levy selective sales taxes on the sale or lease of particular goods or services. States may grant local governments the authority to impose additional general or selective sales taxes.
The Streamlined Sales Tax Project (SSTP), first organized in March 2000, is intended to simplify and modernize sales and use tax collection and administration in the United States. It arose in response to efforts by Congress to permanently prohibit states from collecting sales tax on online commerce. Because such a ban would have serious financial consequences for states, the SSTP began as an effort to try to minimize the many differences between the states' sales tax policies and practices. The SSTP was dissolved once the Streamlined Sales and Use Tax Agreement (SSUTA) became effective on October 1, 2005.
Tax-free shopping (TFS) is the buying of goods in a foreign country and obtaining a refund of the sales tax which has been collected by the retailer on those goods. The sales tax may be variously described as a sales tax, goods and services tax (GST), value added tax (VAT), or consumption tax.
Internet tax is a tax on Internet-based services. A number of jurisdictions have introduced an Internet tax and others are considering doing so mainly as a result of successful tax avoidance by multinational corporations that operate within the digital economy. Internet taxes prominently target companies including Facebook, Google, Amazon, Airbnb, Uber.
The National Retail Federation (NRF) is the world's largest retail trade association. Its members include department stores, specialty, discount, catalog, Internet, and independent retailers, chain restaurants, grocery stores, and multi-level marketing companies. Members also include businesses that provide goods and services to retailers, such as vendors and technology providers. NRF represents the largest private-sector industry in the United States that contains over 3.8 million retail establishments, supporting more than 52 million employees contributing $2.6 trillion annually to GDP.
Quill Corp. v. North Dakota, 504 U.S. 298 (1992), was a United States Supreme Court ruling, since overturned, concerning use tax. The decision effectively prevented states from collecting any sales tax from retail purchases made over the Internet or other e-Commerce route unless the seller had a physical presence in the state. The ruling was based on the Dormant Commerce Clause, preventing states from interfering with interstate commerce unless authorized by the United States Congress. The case resulted from an attempt by North Dakota seeking to collect sales tax on licensed computer software offered by the Quill Corporation, an office supply retailer with no North Dakota presence, that allowed users to place orders directly with Quill.
Digital goods are software programs, music, videos or other electronic files that users download exclusively from the Internet. Some digital goods are free, others are available for a fee. The taxation of digital goods and/or services, sometimes referred to as digital tax and/or a digital services tax, is gaining popularity across the globe.
In National Bellas Hess v. Department of Revenue of Illinois, 386 U.S. 753 (1967), the Supreme Court ruled that a mail order reseller was not required to collect sales tax unless it had some physical contact with the state.
Amazon's tax behaviours have been investigated in China, Germany, Poland, South Korea, France, Japan, Ireland, Singapore, Luxembourg, Italy, Spain, United Kingdom, multiple states in the United States, and Portugal. According to a report released by Fair Tax Mark in 2019, Amazon is the worst offender of tax avoidance, having paid a 12% effective tax rate between 2010-2018, in contrast with 35% corporate tax rate in the US during the same period. Amazon countered that it had an 24% effective tax rate during the same period.
The Alliance for Main Street Fairness is an advocacy group based in the United States of America dedicated to ending what it sees as unfair tax advantages for online-only retailers with respect to the collection of sales taxes. The group supports the Marketplace Fairness Act. Members include retailers such as Wal-Mart, Target, Best Buy, Home Depot, Sears, and thousands of small retailers.
In Miller Brothers Co. v. Maryland, 347 U.S. 340 (1954), the Supreme Court ruled 5-4 that a mail order reseller was not required to collect a use tax unless it had sufficient contact with the state.
The Marketplace Fairness Act is proposed legislation pending in the United States Congress that would enable state governments to collect sales taxes and use taxes from remote retailers with no physical presence in their state. Identical versions were introduced into both the United States House of Representatives and the United States Senate during the 113th United States Congress. During the previous, 112th Congress, a bill was considered but expired without enactment.
Direct Marketing Association v. Brohl, 575 U.S. ___ (2015), was a United States Supreme Court case in which the Court held that a lawsuit by the Direct Marketing Association trade group about a Colorado law regarding reporting the state's tax requirements to customers and to the Colorado Department of Revenue is not barred by the Tax Injunction Act. While the case was reheard and found in favor of Colorado, the concurrence of Justice Anthony Kennedy provided a means for states to bring a challenge the ruling of Quill Corp. v. North Dakota, which has prevented states from collecting taxes from out-of-state vendors.
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax.
South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), was a United States Supreme Court case in which the court held by a 5–4 majority that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. The decision overturned Quill Corp. v. North Dakota (1992), which had held that the Dormant Commerce Clause barred states from compelling retailers to collect sales or use taxes in connection with mail order or Internet sales made to their residents unless those retailers have a physical presence in the taxing state.