Sales Tax: What is it and How to Add it (Charge it) to the Listed Selling Prices (Before Tax)
What is the "Sales Tax"? What is the "Sales Tax Rate"?
The Sales Tax is a consumption tax imposed by states, counties or/and cities and municipalities on the sale of goods and services, in the U.S.
Its equivalent in Europe is the Value Added Tax (VAT) and in Canada, the Goods and Services Tax (GST - HST in provinces where the provincial and federal taxes have been harmonized).
The sales tax is paid by the final consumer to the retailer at the point of sale as a percentage of the selling price of the sold good or service.
This percentage, called the Sales Tax Rate, varies from state to state, in California for example there is a general sales tax rate of around 6%.
To continue our example, cities and/or municipalities of California are also allowed to collect their own sales tax with rates ranging up to 1.75%. So a combined sales tax rate could build up to 7.75% or even more if we also add the individual county sales tax rate...
6.5% is the lowest possible sales tax rate in California, in the city of Los Angeles.
The sales tax amount paid for by the final consumer is then transfered by the retailer to the state, county or/and municipality.
A significant volume of documentation is gathered in order to determine which economic entity is ultimately liable for charging the end users the sales tax along with the price of sold items or services.