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Sales Tax
Sales tax is the branch of tax law that relate to the taxation on the purchase of a product or service.
 
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The amount of sales tax is typically a percentage of the value of the item being purchased

Sometimes, sales tax will only apply to the value of the item at the time it is being sold to the end consumer. Other times, the tax will apply each time the product is transfered as it travels through its supply chain. It also applies to any service that is being supplied at any stage of the supply chain. An example of this type of tax is the European VAT, or Value Added Tax. As the name suggest, the tax relates to the amount of value created at each stage in the supply chain. This works through giving a credit for the amount of this tax paid by an organisation for inputs. For example, if the organisation paid $10 for inputs (such as on services and raw materials) and the tax rate was 10% they would have had to pay $11 for the inputs, $10 for the raw material and services and a $1 tax. If they then sell the item for $15, they would collect $1.50 from the purchaser as a tax. The organisation would have to remit $0.50 as a tax to the government as they would get a $1 credit for the tax they paid on the inputs.

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