Posted in Finance, Accounting and Economics Terms, Total Reads: 301
Definition: Sales Tax
Sales tax is tax charged on goods and services which is paid by the customer at the time of purchase. The tax so collected is submitted by the shop owner (or retailer) to government at a later stage. Sales tax is a fixed percentage on total bill charged at retail point.
Example Government of India currently has a Sales Tax at 14.50% (2016). This means if the bill is INR 100 then the total amount paid would INR 114.50 in which INR 14.50 is the sales tax collected by retailer or service provider. But this amount is not earned by him. It has to be paid to IRS or other bodies in timely manner.
Many a times people avoid taking bills so that they can save sales tax and get the product for less. As in our example, such product would costs INR 100 and 14.50 would not be charged. The entire INR 100 is unaccounted for later on.
Sales Tax is a very important tool for the government.