While standing in line at the grocery store behind a mother and her son, I was reminded of an instance with my sons many years ago. I thought it would be a good financial lesson to give my sons some money to purchase various grocery items. They made some wise choices and counted the money they would need to pay for their groceries including tax. After they paid for the items, I noticed my youngest son waiting for the clerk with an outstretched hand. “Honey, what are you waiting for?”, I asked. He replied, …. “my tacks (tax)!”
Clearly my son was a bit confused about sales tax …. but then again many of us might not have a clear idea of what these funds are for. Given the current election climate and general discussions of taxation, now may be a good time to review sales tax and how is collected and distributed. According to the dictionary, “sales tax is a consumption tax assessed when individuals and businesses purchase goods or services”.
Sales taxes are usually added to the cost of a product or service and are generally paid by the customer and can vary by state. Most states and taxing authorities impose a sales tax on goods and service and businesses are responsible for collecting sales taxes and remitting them to appropriate taxing authority. Taxes are (usually) paid by the retail consumer – whereas goods that are sold to wholesalers or manufactures are exempt from taxes.
In Iowa the state sales tax rate is 6. 0% but some communities add additional sales tax known as local options sales tax. In the U.S. sales taxes can play an important part in the growth and advancement of local communities and is often used for; community development, public services, and protective services.
For more information * Tax rates in your area, https://www.idr.iowa.gov/salestaxlookup/index.asp.
* Business tax information contact: Iowa Department of Revenue and Finance, PO Box 10465, Des Moines, IA 50306-0465, or fax it to (515) 281-3906, or go on their website at www.state.ia.us/tax or : http://smallbusiness.findlaw.com/business-taxes/sales-and-use-tax.html#sthash.svM2KMqG.dpuf
Mary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money. Mary likes to save for rainy days but carries an inflatable kayak the trunk of her car for the sunny ones!
Guest Blogger, Mary Weinand