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Financial Planning / Tax Reform


Subject:  Re: National Sales Tax Question Date:  6/6/2001  11:18 AM
Author:  Nathar Number:  69 of 80

The confusion in implementing a sales tax is deciding what the final "sale" is. In a value added tax, as you mentioned, every step of the process is taxed. In some ways, this is actually simpler. For an end use tax, it's a little more complicated to determine what the end use of a product is. If you buy corks to stick in bottle for $1.00, you'd have to pay 25 cents in sales tax. If I buy corks to make fishing lures which I sell, I wouldn't have to pay the 25 cents sales tax. The huge temptation, then, is that if I want a cork to stick in a bottle I say that I'm using it to make a fishing lure instead, saving me 25 cents. Doesn't seem like a big deal, but think about how much a computer costs. If you're buying a computer for your business it would cost $500 less than if you were buying it for your personal use.
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