Sunday, March 20, 2011

Consumers Fleeced by Sales Tax

It's a fact of life that you'll pay a sales tax on nearly everything you purchase. The fact that retailers also make millions off of collecting sales taxes may be something new to you.

Retailers fleece the consumer daily from the sales taxes they collect and they do it legally. Laws and tax rates vary in each state but in Pennsylvania the base sales tax is 6%. Remember that sales taxes are taxes on the buyer, not the seller. Since the majority of buyers would not report sales taxes due, the seller generally collects these taxes at time of a sale and later forwards to state government. In PA the frequency of reporting and forwarding sales taxes depends on the volume of revenue each business transacts. A mom and pop store may only need to submit sales taxes twice a year while a large retailer like Walmart would submit sales taxes monthly.

Here's the first fleecing of your money. You pay 6% sales tax at time of sale. Retailer will submit amount of tax collected a month later. If they due this before the due date they get a 1% discount. This money is not refunded to you the buyer, it's put in the pocket of the seller, the retailer. Not much money when it comes to mom and pop, but millions when it comes to Walmart.

Here's the second fleecing of your money. Now lets take that sales tax money and put it into an interest bearing account. Collect some interest on that money before it's submitted to the state. Again boat loads of free money for the retailer at the expense of the consumer.

As an extra note, Walmart seems to carry themselves as wanting to lower the cost for consumers. Why then don't they only charge 5% for sales tax?? when that's all they'll be submitting to the state. Many struggling consumers would greatly appreciate that extra 1% in their pocket.


At 10:24 PM, Anonymous Anonymous said...

You are not entirely correct..businesses are given a 1% discount of the sales tax collected not 1% of sales. If a business has sales of $100,000 they collect tax of $6000 and by paying that to the state on time are given a discount of $60. It is to cover expenses of filing returns and payments twice a month to the state. Tax payments are made to the state every 15 days so there is no gain of interest on the money.


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