Sales tax is a tax calculated on the basis of the company’s turnover, but its particularity lies in the fact that the determination of the amount of tax is carried out on the basis of a “tax deduction from tax”. At each stage of production and marketing, the taxpayer is in fact authorized to deduct from the amount of Sales tax due the tax which was added at the previous stage.
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After having applied the rate (19.6% in principle) to its turnover, the taxpayer therefore deducts from the amount obtained the total Sales tax that he himself has incurred upstream, that is to say which appears on the invoices of his suppliers and he pays the tax authorities only the difference. The use of the state sales tax calculator is essential there.
In other words, companies charge the final consumer the tax on the sale of goods and services and they pay to the Treasury the difference between the tax thus collected and that which they themselves paid at the time of their purchases. Companies can therefore deduct the Sales tax that they themselves have paid to their suppliers during their purchases, from the Sales tax that they have collected.
We must therefore distinguish:
- the Sales tax collected (constituted on the amount excluding sales tax)
- deductible Sales tax (paid to other intermediaries)
- Sales tax due (difference between collected Sales tax and deductible Sales tax)
Ultimately, since he does not benefit from this possibility of deduction, it is the final consumer who pays the Sales tax. When selling a good or service, the buyer pays the seller the price including Sales tax (= price excluding tax + Sales tax).
The calculation of Sales tax
We have seen that Sales tax applies to all trade in goods and services carried out against payment in a usual independent manner, including agricultural activities and the liberal professions. Sales tax is calculated on the net price excluding tax, after calculation of the sales costs and any reductions.
Sales tax liability
At the end of each month, businesses report the Sales tax collected on sales of goods and services and deductible Sales tax on purchases. On the other hand, they pay only to the Public Treasury the Sales tax due, ie the difference between the Sales tax collected and the Sales tax Deductible.
Advantages and disadvantages
The advantages of Sales tax are numerous: economic neutrality, fiscal anesthesia, investment and export incentives, ease of collection.
The main drawback is its injustice: the tax is integrated into the price, so it is ultimately borne by the consumer. It affects consumption without taking into account the family situation of the taxpayer and the size of his income.
This is also the reason why this tax is called a “painless” tax. The consumer does not realize that he pays a share of Sales tax when buying his baguette, for example.