state, and local governments include income taxes, excise taxes, and estate and gift taxes. (20) [LO4] The state of Georgia recently increased its tax on a pack of cigarettes by $2.00. What type of tax is this? Why might Georgia choose this type of tax? The cigarette tax is both considered an excise tax (i.e., a tax based on quantity purchased) and a “sin” tax (i.e., a tax on goods that are deemed to be socially undesirable). Georgia may choose this type of tax to discourage smoking and because sin taxes are often viewed as acceptable ways of increasing tax revenues. (21) [LO4] What is the difference between a sales tax and a use tax? The tax base for sales taxes is retail sales of goods (and some services). The tax base for the use tax is the retail price of goods owned, possessed or consumed within a state that were not purchased within the state (e.g., goods purchased over the internet). (22)
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