Indirect taxes

On production, consumption, or on transactions, such as imports and exports, indirect taxes are imposed. Taxes on every part of production or manufacture, taxes on legal activities, general and selective sales taxes, value added taxes (VAT), and customs or import charges are a few examples.

A sizable amount of consumer spending is subject to general sales taxes, which are levied. All taxable items may be subject to the same tax rate or may be taxed at various rates depending on the item (such as food or clothes). Single-stage taxes may be levied at the retail level, as are the states of the United States, or at the pre-retail level (i.e., the manufacturing or wholesale level), as do several developing nations.

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Each stage of the production-distribution process is subject to multistage taxes. The VAT, which gained popularity in the second half of the 20th century, is often collected by letting the taxpayer subtract the tax paid on purchases from the responsibility owed on sales. The turnover tax—a charge on each stage of the manufacturing and distribution chain with no credit for taxes paid at earlier stages—has mostly been superseded by the value-added tax (VAT). Decisions about the economy are distorted by the turnover tax's cumulative effect, often known as tax cascading.

Sales taxes may exclude basics to lessen the tax burden on low-income households, even though they typically apply to a wide variety of goods. In contrast, only specific goods or services are subject to excises. While some nations tax nearly everything, including essentials like bread, meat, and salt as well as non-essentials like cigarettes, wine, liquor, coffee, and tea as well as luxuries like jewels and furs, most nations collect the majority of their excise taxes on a small number of goods, primarily alcoholic beverages, tobacco products, and motor fuel.

Prior centuries imposed taxes on luxury goods including pianos, saddle horses, carriages, and pool tables as consumer durables. The car is becoming a primary target of the luxury tax, in large part because registration laws make tax collection easier. State-run lotteries have effects akin to excises in certain nations, and the "take" made by the government functions as a form of gambling taxation. Taxes are levied in certain nations on machinery, intermediate products (such as mineral oil and alcoholic beverages), and raw materials.

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