Still puzzled about sales tax (transaction, buy, cost, stores)

[Mooseketeer]

As a non American I am baffled every time I come to the US (which is regularly) about sales tax. Why is it not added automatically to the price of goods on display so you know exactly how much things cost ? Most non Americans I have spoken to always get what we think is the right change ready but of course your total after sales tax is completely different when you get to the till!!!? It's very confusing.
Same with hotel bills etc.. Why isn't the inclusive price the one advertised?

I should know better by now but it still gets me every time... Americans are obviously way better at maths than Europeans.

Is there a specific reason why it is this way ? Historical , economic, legal....
Just wandering, I'm sure it's pretty obvious when you know the answer but still please enlighten me , please.

[Cosmic]

The amount of tax varies, depending on what makes up the total. In certain cases not everything is taxable as a sales tax. Depends on location and the various rules and regs. In many places food and some clothing items are exempt. It will vary greatly state to state.

An example, 3 cans of dog chow for $1. You pay a different amount, which is higher, if you only buy one can, instead of three. It is because of the fractional cents and they always round off in flavor of the government. The tax is applied in a non-proportional way in many cases. You might pay 3 cents on the first can, 5 cents for two cans, 6 cents for 3 cans. Just do it that way to confuse foreigners.

So if, you try to build the tax into the price, the government will get even more. Plus it will probably also create a nightmare trying to get the merchant to give the government the right amount. Tax is always figured on the taxable amount of the total. Not everything is taxable, you can also get into weird situations of paying even more tax on another tax.

The only way to really solve it is abolish all taxes.

It is also a common scam by grocery stores to play around with how they attempt to charge the tax to get a bit extra for themselves.

[Mooseketeer]

Thanks, I had assumed tax was at a set rate as in Europe ! Talk about confusing... Don't Americans themselves get muddled?

[BrianH]

Varies from state to state and city to city.
Its a flat 7.5% tax here in New Mexico. It really bugs the hell out of me when stores dont include the sales tax in their prices. I think the whole reason is the shop teller is trying to say this is how much i charge you, and the gov is adding this amount onto your product. Its the same in europe, product + tax = prices, except vendors put the total price on labels, avoiding the confusion. So when you go into a Eurostretcher or Poundstore, that 1euro product costs you just that. I hear alot of shop keepers / hotels complaing how much tax they have to pay on stuff they sell, but they (visibly) pass 100% of it onto the customer. IMHO it would make good business for them to include it in the price of what they sell, (ie, on the price sticker), it would definately be hte deciding factor between shopping in ShopA and ShopB

[virangos]

As an american it gets confusing. PA. has a state sales tax that you get used to paying, and than you go to Philadelphia, or Pittsburg, and they tag on a city tax.

I like cosmic's idea to abolish taxes.

[Tek_Freek]

I always get a kick out of prices like $1.99 As if were all too stupid and think we're getting a really good price because is not $2.00. Of course .99 cents is used unless it's a three fer. Then it's three fer a dollar. Yeah I only need one, let me get out my thra Penny (English folks might get that one - maybe) so I can give you the exact change.

For the rest of you my thra penny witticism (or what might pass for one) was a spin on: http://www.thefreedictionary.com/ha'penny

When we go to the grocery store here some items are taxed and others are not, so you can't just keep a running total and make a guess at what it's going to be.

The whole point behind it is to make you feel like the items are costing you less. Truth in advertising at it's best.

[Southlander]

The reason tax is not included in an item's price is because of state law, which (at least here in Alabama) specifies that a price may not include the sales tax. Merchants are required to add the tax to the cost of the item. There are a few exceptions, such as for movie tickets.
And...sales tax amounts can vary within a state. Here, we have a 4 per cent state tax, with a county tax, and a city tax. In my town it's 9 per cent...in the county it's 4...in another city in this county it's 8...AND...many governments levy special lodging taxes to the cost of hotel rooms...few of these taxes are voted!

[Mooseketeer]

Originally Posted by Southlander

The reason tax is not included in an item's price is because of state law, which (at least here in Alabama) specifies that a price may not include the sales tax. Merchants are required to add the tax to the cost of the item. There are a few exceptions, such as for movie tickets.
And...sales tax amounts can vary within a state. Here, we have a 4 per cent state tax, with a county tax, and a city tax. In my town it's 9 per cent...in the county it's 4...in another city in this county it's 8...AND...many governments levy special lodging taxes to the cost of hotel rooms...few of these taxes are voted!

How on earth are you supposed to know how much things actually cost ? I definitely prefer the European system where I know exactly what I'm paying before I get to the till. Far easier...

[johnrex62]

Originally Posted by Mooseketeer

How on earth are you supposed to know how much things actually cost ? I definitely prefer the European system where I know exactly what I'm paying before I get to the till. Far easier...

I agree, I would much prefer knowing the total cost before concluding a transaction. I did not know some states prohibit advertising a tax included price. Texas tax law permits sales under either method. It is just easier to account for the taxes if the sales are tabulated and a tax percent is added on rather than trying to strip out the tax monies from receipts after the fact. This is further complicated by the fact that most jurisdictions tax at different rates and on different items. Food items used to prepare meals is not taxed in Texas where ready to eat food items are taxed. Some places have multiple taxing entities that have different taxable items...so a city might tax a soft drink and burger at 3% and the county the city is in may also have a 1% tax on the burger and a 0.5% tax rate on the soft drink. Imagine trying to figure out how much to send to each tax office if you only know you did $650 in sales, but not how many soft drinks and food items made up that total.

Another factor is price comparison. It is difficult to compare stores by total price since they may be in different taxing areas. The store in the high tax area does not want to loose business to the low taxed store by advertising their product at a higher price, so they both use the same base price for their advertising so shoppers get a "fair" comparison on that product. Since taxes are not in the control of the vendor, they can price compete on controllable factors such as buying power, business efficiencies and profit margin.

[BrianH]

I usually just add 10% of the cost of what im paying to the product to tget the final price. A little high i know, but at least you come out better than you thought. 10% is better than 7.5% hehe