ECO 356 Sales, Use & Excise TaxesMarch 25, 2014M. Cummings
Sales TaxesThree major types of consumption taxes used by State/local governments:General Sales Taxes Use TaxesExcise Taxes: Motor Fuel Cigarettes Alcohol
Sales TaxesMost states rely heavily on this source of revenue for their budgets. Important source of revenue for local governmentsEx. New York Sales Tax imposed by State and County governmentsAdditional taxes may be imposed by the municipalityNew York City additional tax
General Sales & Use Taxes General Principle – to tax the total final personal consumption of residents in the jurisdiction
Consumption Tax: Structural Issues Tax BaseTrue General Consumption Tax: would apply to all personal consumption i.e. all uses of income (except for savings & purchases of government services)
General Sales & Use TaxesDeviations from this principle•Tax Base•Personal Consumption Exemptions•Stage of Production•Intermediate Goods v. Final Sale•Location•Residents of other jurisdictions/Mobility
Consumption Tax: Structural Issues Tax BaseMost states exempt major categories of personal consumption from tax the sale tax.