Sales Tax

Written by Lori Covington
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Sales tax is a tax set by the state and local tax districts (counties and cities) rather than by the federal government. Taxes on sales are imposed upon consumers, so when you purchase something at the store, an additional percentage is tacked onto the cost. Sales tax is set by each state, and some states have no taxes on sales at all, sometimes making up the loss of revenue by having higher property taxes.

With recent internet business and sales booming, states are attempting to regain the sales tax they would have acquired had those goods been purchased in brick and mortar stores. If I purchase a television from Montana, where there is no sales tax, and have it shipped to my house in California, I am subjected to a "use tax" by the state of California, which helps the state recoup its tax loss on my having bought my TV out of state.

Paying sales tax at the grocery store is a simple matter: the cash register computes the tax on taxable items. Understanding what constitutes a taxable item can be tricky. In California, where the tax on salable items is currently 7.25 percent, tax districts add their own tax on top of the statewide one, with the result that if you buy your computer in Oakland, California, you're going to pay 8.25 percent total in sales tax.

Sale Tax Feeds the Community

The added taxes go to pay for state expenses such as education and roads. In one oddly threatening commercial, the Mayor of Oakland remonstrates with Oakland residents for buying their cars outside of the city, saying that Oakland needs those tax dollars. It would be interesting to know whether the city's automobile sales community funded the commercial, or whether state taxes paid for it.

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