Quote:
Originally Posted by HarryT
Sorry, I don't understand. Why isn't the tax simply charged "at source", the way it works with VAT here in Europe? Obviously, if you leave it up to the individual to decide whether or not to pay it, many are going to choose not to - that seems like a very strange system!
|
We don't have a Value Added Tax here in the U.S. We've got a mishmash of different types of sales and use taxes. Sales taxes are taxes on the retail transaction itself, not on the item being sold. The problem with sales tax is that if the buyer and seller aren't physically present in the same state, then the state doesn't really have jurisdiction over the sale. So they invented "use" taxes to close that loophole. Use tax is a tax on someone "using" the item.
Use tax is generally only collected on vehicles (which have to be licensed and registered with the state) or collected by those out-of-state companies that, because they happen to have a physical presence in the state, and are thereby required to collect it from their customers. Individual persons are still legally obligated to report their general merchandise out-of-state purchases and remit use tax on them, but hardly anyone bothers to do so, and the state doesn't bother to enforce that requirement. Another example of a use tax is when a store takes an item out of their sale inventory, and uses it themselves. They've then become the end user of the item (rather than the customer who would have paid sales tax), and thus the company is liable for tax on it.