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Whenever we go to a store or supermarket we pay taxes on many products. Sometimes different products have different tax rates too, which makes things even more complicated. I was wondering if stores and supermarkets use our sales taxes to pay for their taxes, or do our taxes go directly to the government while they have to pay additional taxes on top of what we pay.

If they use our taxes to pay the government, why don't they just include it in the price that you see to make things more predictable and simple? They can even show how much of the price you pay that contributes to taxes on the receipt after checkout...

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The mechanism for paying income tax varies by business type, in general it's paid quarterly. Sales tax is separate regardless of business type. They collect sales tax from purchases and then send those collected sales taxes to the government(s).

Sales tax is collected on sales, while income tax for the business requires profit to be made. So an unprofitable company could collect (and pass along to the government) millions in sales tax without paying any income tax. How much income tax needs to be paid for an individual transaction is unknown until end of tax period.

One reason why sales tax isn't included in the listed price is because sales tax rates vary by city/county/state and stores in multiple regions often have one website and mail advertised prices to large regions. If I find a tv I want at Best Buy, I could order it online and pay the sales tax rate for my home address, or I could drive to a store in a different city and pay the sales tax rate for that city. To include sales tax in the price means advertisements would have to be based on an individual location. Some retailers do this by requiring you to log in or put in a zip code to get a price, but even then they typically still show sales tax separately.

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    The reason why they don't include the sales tax in the price is because it makes it look cheaper. It was a universal practice long before the Internet, big box stores, or most national chains existed. – Ross Ridge Aug 3 '19 at 3:20
  • If you buy something in another US state and bring it home (or have it delivered or shipped), all states I know of impose 'use' tax equal to the sales tax you would have paid at home to the extent it exceeds the sales tax (if any) you actually paid in the other state. You are supposed to assess and pay this yourself, and many people don't bother or don't even know, but it is owed. – dave_thompson_085 Aug 4 '19 at 23:47
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To add to Hart CO's correct answer, the collection of sales tax is a burden on the business. In most cases it is straightforward, but not all.

In one jurisdiction, there was an additional surcharge on desserts except for those that include ice cream. So restaurants, in a certain area, would have to collect and send taxes to a small local government only in that case of someone ordered a dessert that did not include ice cream. I worked for a national chain at the time and there was no way to identify if a dessert included ice cream nor could you use zip code to identify the locations that these laws applied.

If one is to open a retail business one must have a firm grasp of the sales tax laws where one operates.

  • Let me guess, this was an area with a large dairy industry. – Glen Yates Aug 2 '19 at 17:57
  • @GlenYates actually no. Coastal town. Our speculation was that one of the city councilman owned a bunch of ice cream shops. – Pete B. Aug 2 '19 at 18:07
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    Then we need to start a question on Law SE on what qualifies as "ice cream." – Damila Aug 2 '19 at 18:15

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