My American Brethren! Can you explain this to me?

[Tanto-chan]

The whole "sales tax" thing. When buying stuff, it says one price when you see it on the self, right? But then when you take it to the cashier, it adds like 7% of the price to whatever you're buying, yeah? How does that make sense? My reasoning for asking this is that I'm going to Hollywood for a holiday next year, and I don't want to get caught out when I try to buy something.

So I'm asking any Americans reading this, why do shops in your country do that? Is there some legal reason why it happens? Do all shops do that over there? And for other people not from America, does this happen in your counrty, or does it make any sense to you? It's something I can't get my head around on my own.

EDIT: To clarify, what I'm basically asking is why can't American shops include VAT (or thier equivalent) in their prices?

Yeah sales tax, I'm sure you get the drift by now but here's the reason you're looking for (as far as I can tell) The reason there's a difference between the price listed and the price you pay (instead of just listing it with the tax) is because a company will label an object as 1 straight price while each state has a different sales tax. An exaple would be New Jeresey has 7% sales tax, Deleware has 0% sales tax. So it's easier for the company to have the base price and let the cashregisters for each state handle the differences instead of printing a different thing for every state (or just about ever state).

 

[chickenlord]

it differs for each state, like in PA its 6 cents for each dollar, and i dont even think Maryland has sales tax, but i couldnt say what it is in California

 

[TRR]

At least in british Columbia, Canada, not everything is taxed the same. So if you include it in the price you would have no idea what you are being taxed by

 

[rt052192]

sales tax varies from state to state and it essentially funds the state and state programs, I think...

 

[sirkai007]

Its just sales tax, the sticker price is what the store keeps, the 7% extra goes to the goverment.

food, cloths, something else are exempt though.

Only in certain states are there exemptions. Nevada I know for sure exempts just about anything edible.

OT: I think it's important to note that the sales tax is imposed by the STATE governments and not the Federal. The revenue generated this way stays in the state that collects it and it is often used to fund schools and build parks and roads.

 

[sirkai007]

it differs for each state, like in PA its 6 cents for each dollar, and i dont even think Maryland has sales tax, but i couldnt say what it is in California

You don't wanna know what it is in California.

 

[lukenhiumur]

No sales tax in Nevada. Of course, then you have to live in Nevada.

 

[ultrachicken]

Bad marketing.

 

[SonicKoala]

Taxes differ by state in the U.S., just as they differ by province in Canada - thus, rather than adjusting the price of the exact same item every time it goes to a certain province/state, all stores show is the price which the company/distributor is charging for that item; it's just more practical to factor in the tax once you get up to the register. If you want to pay the price you see on the shelf, you should go to Oregon or somewhere similar, since I'm pretty sure they have no sales tax.

 

[XJ-0461]

Wow. More interest in this thread than I thought.

Thanks to all the people who've posted so far, as you've all helped me to understand this a lot better. And while annoying I guess I can put up with it for a week, especially if it isn't as simple as I thought the whole thing was.

 

[SenseOfTumour]

Just as an aside, in the UK, when VAT dropped from 17.5% to 15%, most stores, even large ones, just put up a sign saying effectively 'we're not changing all our damn prices, just for the sake of a few months, so just relax and we'll knock the 2.5% off at the till'.

Sadly they couldn't do that when the VAT returned to 17.5% as while you advertise price labels as higher than you're going to charge, you can't do it in the other direction.

I'd almost not mind if they just hurried up and pushed VAT to 20%, just because it'll be so much easier to work out in your head - double it, divide by 10, VAT. In fact the rare times I need to work it out in my head, I do that and know I'm erring on the side of caution at least.

 

[acosn]

I think it has something to do with tax transparency laws. If they're displayed they have to be broken down piece by piece and then that'd make for one confusing as hell label.

There's also the part where some states have no sales tax. Oregon for one.

 

[JohnSmith]

The whole "sales tax" thing. When buying stuff, it says one price when you see it on the self, right? But then when you take it to the cashier, it adds like 7% of the price to whatever you're buying, yeah? How does that make sense? My reasoning for asking this is that I'm going to Hollywood for a holiday next year, and I don't want to get caught out when I try to buy something.

So I'm asking any Americans reading this, why do shops in your country do that? Is there some legal reason why it happens? Do all shops do that over there? And for other people not from America, does this happen in your counrty, or does it make any sense to you? It's something I can't get my head around on my own.

There's actually a very clear and simple reason for this. It's a type of advertising. You'll notice that in America most prices aren't 2.00, but instead 1.99. This subliminally encourages people to buy the product, even though with tax it is probably closer to 2.07. People see the one in front and are more likely to buy. Not by much, mind you, but likely enough that almost all stores in America are willing to throw away a penny on every product.

Actually they have done some cool psych studies on that one, it turns out that the more complex looking number "1.99" is more "trustworthy" people think that it is a true reflection of value rather than being arbitrarily assigned.

They don't list the equivalent on the shelf in Australia either I think because the percentage is applied to the whole bill not the single item. Though I'm not entirely sure.

 

[Unesh52]

Lol! I freaked the hell out when I read that without your edit; I couldn't figure out how that happened. Yes, that was a typo there and it was supposed to be 39.94. I'm not sure I really agree with you though. I would need to see some data suggesting the degree to which rounding error affects the ultimate price -- if it were small enough, VAT pricing (I think I'm talking about that correctly) would still be practical in small consumer sales. And I can tell you right now that the price being particularly high or low has much less to do with the round off error than how "round" the price is. The error in for something that's like $5079.00 would be less than than something that's like $2.38.

Mathematical theory FTW!

I have a very simple example for you:

A product costs $9.95. I want 2 of them. For convenience let's say tax is 10%.

If taxed at the total price you get 10%*(9.95+9.95) = 10%*19.90 = $1.99 tax.

If taxed on each item you get 10%*9.95 = 0.995, which is rounded to $1.00 (so $2 total)

So one way you get one penny more than the other. You will only get at most 1 penny difference for each item after the first (although that becomes increasngly unlikely as you add more items).

Not much on an individual basis but when you consider how many transactions are made per day in even one county that can add up.

Fair enough. But it makes me wonder, how do they calculate taxes here in the states? a percentage of the total or individually?

 

[WolfThomas]

As some people have mentioned in Australia, this sales tax (GST) is automatically added to the displayed price, so if some is displayed as $50 it is $50. Seriously how hard is that USA?

 

[BiscuitWheels]

It's kind of stupid. Why isn't it just included in the price? That would make everyone's life a load easier.

It could be because there are different tax rates in different states, and they put down the untaxed price for standardization. It might also be so that the tax on the item is properly noted, and people don't get confused about exactly how much it costs, and they know what base price they're paying before taxes. It's like with income taxes where you know how much you get paid, and then how much after taxes.

So wait....it isn't 7% in all states? This is confusing the hell out of me. you see a price, take the item to the counter, and they tell you it's actually more than they advertised? That sounds like false advertising to me. Here in the UK that gets you in a lot of trouble.

Still, no idea why they seem to think it's SUCH a ballache adding 7% to an advertised price. I mean, how stupid can you be if you think you're getting an awesome deal, only to be told you have to pay more in a few minutes?

Different in each state? Hell, it differs from county to county within a state. It's a giant pain in the ass. And from state to state, different items have sales tax. In my state, New York, certain foods are taxed and some aren't. Soda is taxed, candy is taxed, most groceries aren't. Stuff like that. Hell, when I worked at 7-11, a burrito would be tax free...unless you heat it up in the microwave, then it counts as a prepared food and is then taxable. There's a reason why the tax code in this nation is like 16,000 pages long.

 

[KaiRai]

It's kind of stupid. Why isn't it just included in the price? That would make everyone's life a load easier.

It could be because there are different tax rates in different states, and they put down the untaxed price for standardization. It might also be so that the tax on the item is properly noted, and people don't get confused about exactly how much it costs, and they know what base price they're paying before taxes. It's like with income taxes where you know how much you get paid, and then how much after taxes.

So wait....it isn't 7% in all states? This is confusing the hell out of me. you see a price, take the item to the counter, and they tell you it's actually more than they advertised? That sounds like false advertising to me. Here in the UK that gets you in a lot of trouble.

Still, no idea why they seem to think it's SUCH a ballache adding 7% to an advertised price. I mean, how stupid can you be if you think you're getting an awesome deal, only to be told you have to pay more in a few minutes?

Different in each state? Hell, it differs from county to county within a state. It's a giant pain in the ass. And from state to state, different items have sales tax. In my state, New York, certain foods are taxed and some aren't. Soda is taxed, candy is taxed, most groceries aren't. Stuff like that. Hell, when I worked at 7-11, a burrito would be tax free...unless you heat it up in the microwave, then it counts as a prepared food and is then taxable. There's a reason why the tax code in this nation is like 16,000 pages long.

Wow. Holy hell.

Is this why stereotypically people think Americans are less intelligent than the rest? Because I'm 19 and that's just fried my brain. Trying to understand that as a kid could mentally retard you!

I understand how it would be difficult implementing it around the whole country, because the US is enormous. But state to state could surely be implemented...

I'm glad I'm in the UK where they seem to assume we're all dumb as posts and do it for us. I like that. You have my sympathy for working in a 7-11 though..I hear they're like the holy grail of stoners paradises. Trying to 7% tax it for stoners would be a nightmare

 

[Hyper-space]

Oh yeah, sure. The government claims that it is for the good of the people, the sales tax. Yet, we all know the dark-seeded truth that they are really using it to build a robot army to march across the land that...you know, fix our roads, and pick up litter and stuff.

Those...DEMONS!

Demons? Ho ho, demons indeed. Let us not put it past the ol' guv to not think about spawning demons from the mists of treacherous realms. I mean, we all know that it happens on mars sometime in the future, right DOOM?

Cause its a well known fact that DOOM was a documentary, a dire warning of what lies ahead of us.

 

[xxcloud417xx]

I'm living in Ontario in Canada and until a few weeks ago we used to have GST (which is the federal sales tax) and PST (which is the provincial sales tax). Not all items had PST on them so you were saved the 8% tax on certain items (the GST was only 5%). However, the awesome Ontario government decided to implement HST (Harmonized Sales Tax) which combines both taxes into one (13%) and is required on ANY sold item. Thus gas prices are now ridiculously high (since they were only subject to the 5% GST) and so are other items.

lol until you start paying 13% tax you shouldn't really complain. And besides taxes pay for your social services.

California sales tax can be as high as 11% in places, and they have an income tax. Not to mention property taxes, and a federal income tax to pay as well. That's not even including hidden taxes that buisness pay for salary which could be going to the worker, medicare, L&I and unemployment insurance taxes.

We get taxed quite a bit here in places, we can complain if we want to.

LOL and you think Canadians don't pay ALL of those too? Like I said, they pay your social services, don't complain. (What you should complain about is not the taxes themselves but the application of our taxpayers money. Shit like bailouts is ridiculous for us to pay for.)