Indirect Tax

An indirect tax is paid during a sale and purchase of a product or service. Indirect usually means that a product is purchased, and a certain state or international tax is, also, paid when the item is bought.
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This type of additional tax is said to be shifted or passed on to a consumer during a purchase transaction. Sales taxes are those that are imposed by state governments within the United States, for example. State sales taxes can range from zero to over seven percent on certain items that are bought.indirect tax

Stamp Duty Tax 2015The states of Arkansas, Delaware, Montana, New Hampshire and Oregon do not impose a general sales tax on goods that are purchased within these particular states. California, however, has the highest sales tax in the US with its 7.25 % sales tax. Other states with at least a 7% sales tax rate include the state jurisdictions of Mississippi, New Jersey, Rhode Island, Tennessee and Indiana.

A sales tax is a type of indirect tax because it is collected by an intermediary or a retail store, for example. There are other forms of indirect taxes that include a specific tax or value added tax. An excise tax is levied against certain goods that are purchased from merchants who sell these items within the US. Excise duty taxes can be levied by each liter or gallon that is sold in this manner. Alcoholic beverages are taxed by the liter or by the percentage of alcohol that is contained in the alcoholic beverage, for example. Cigarettes are taxed by the number of cigarettes contained in a carton.

Cars are another internationally sold product that usually comes with an excise tax mark up. There is an import duty tax that is levied against automobiles and other vehicles, as they are brought into the United States. This higher cost of doing business in the international car markets is passed on as a higher sticker price for an imported car. The supply and demand for certain types of automobiles in the international car market can help to determine the final price of a new automobile and the amount or percentage of import duty that is imposed, also.

The intermediary or retail store will need to file its own company tax return, which quantifies the amount of taxes that have been collected while selling its goods and services. The final price of an item is usually raised to include the state tax that has been imposed. This type of indirect taxing is said to be passed on to the retail consumer.

Indirect taxes or specific taxes can be used to monitor or control certain retail consumer goods and services. Higher indirect taxes for cigarettes were imposed on this consumer product as further information was published about the health hazards of smoking, for example. Alcohol has had certain specific taxes imposed during prohibition years and before. Indirect taxes are often used by the US and other international governments to maintain a certain degree of market competition, also. Imported automobiles began to have higher duty taxes, as certain American car manufacturers saw their car business go to overseas producers.

Indirect taxes are often collected by business intermediaries who are interested in keeping a certain supply and demand monitored or controlled. This type of tax is said to have certain political strengths, at times, and can be used to hold down inflation within a region.