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state or local tax based on a percentage of the selling price of the goods or service that the buyer must pay. It is not revenue to the seller, who simply collects it and passes it onto the state or local government. Assume credit sales of $30,000 are made with a sales tax rate of 8%. The entry to record the sale is:
|Sales tax payable||2,400|
The purchaser cannot deduct sales tax as an itemized deduction.
tax based on a percentage of the selling price of goods and services. State and local governments assess sales tax and decide what percentage to charge. The retail buyer pays the sales tax to the retailer, who passes it on to the sales tax collection agency of the government. For an item costing $1,000 in a state with a 5% sales tax, the buyer pays $50 in sales tax, for a total of $1050. Sales taxes are not deductible on federal or state income tax returns.
percentage tax imposed on the retail sale of certain items. Sales taxes, which are based on the value of the item sold, are a form of regressive tax . They are a major source of revenue for most states.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.