What is the term for taxes that are levied on the sale of goods and services?

The correct term for taxes that are imposed on the sale of goods and services is sales tax. Sales tax is a consumption tax that is collected from consumers at the point of purchase and is usually a percentage of the sale price. This type of tax is generally included in the final price of the item and is remitted to the government by the retailer.

Understanding sales tax is essential because it directly affects consumers and businesses, as it influences purchasing behavior and overall pricing strategy. Recognizing what sales tax is and how it operates within the economy distinguishes it from other forms of taxation, such as income tax, which is assessed on earnings; property tax, which is based on property ownership; and capital gains tax, which applies to profits made from the sale of assets or investments.

Sales tax is a significant source of revenue for state and local governments, and its application can vary by jurisdiction, which is important to be aware of in both business operations and personal financial planning.