Sales Tax in the United States of America As an Example of Consumption Tax
Rana Dayıoğlu ErulConsumption taxes are widely applied in the world today, especially the value-added tax (VAT). While the United States (USA), has no general VAT system, it does have a sales tax similar to VAT. Sales tax is a tax levied on certain goods and services in the last stage of consumption at checkout. The purpose of sales tax is the taxation of goods and services other than luxury consumer goods and general necessities. The sales tax is considered complex in this respect; yet draws attention in terms of being applied at very low rates when compared to consumption taxes worldwide. As a matter of fact, the ratio of consumption taxes to total tax revenues in the USA remains at a very low level compared to other OECD countries, like Türkiye, due to the broad lists of sales tax exemption and very low tax rates. This study, examines sales tax in terms of basic characteristics, before providing a detailed evaluation of taxable goods and services, rate structure and tax expenditures for the state of California, which has the highest sales tax rate and finally making some suggestions through comparisons within the framework of issues such as the ratio of consumption tax to overall tax revenues and the proportional structure of VAT, as the most common consumption tax.
Bir Tüketim Vergisi Örneği Olarak Amerika Birleşik Devletleri’nde Satış Vergisi
Rana Dayıoğlu ErulGünümüzde tüketim vergileri, özellikle katma değer vergisi (KDV) dünyada yaygın olarak uygulanmaktadır. Genel bir KDV sisteminin yer almadığı Amerika Birleşik Devletleri’nde (ABD) ise KDV benzeri bir vergi olarak satış vergisi yer almaktadır. Satış vergisi, belirli mal ve hizmetler üzerinden tüketimin son aşamasında ve kasada alınan bir vergi olup satış vergisinin amacı, temel olarak lüks tüketim mallarının ve genel ihtiyaçların dışında kalan mal ve hizmetlerin vergilendirilmesidir. Eyaletler ve şehirler itibarıyla çok farklı oranlarda uygulanan satış vergisi, bu bakımdan karmaşık olarak değerlendirilmekte; ancak dünya genelinde tüketim üzerinden alınan vergiler ile karşılaştırıldığında çok düşük oranlarda uygulanması açısından dikkat çekmektedir. Nitekim satış vergisinin çok geniş istisnalarla uygulanması ve vergi oranının çok düşük olması nedeniyle ABD’de tüketim vergilerinin toplam vergi gelirlerine oranı; diğer OECD ülkelerine, özellikle Türkiye’ye kıyasla çok düşük düzeyde kalmaktadır. Bu çalışmada satış vergisi, temel özellikleri itibarıyla incelenmiş, daha sonra satış vergisi oranının en yüksek olduğu Kaliforniya eyaleti için vergiye tabi mal ve hizmetler, oran yapısı ve vergi harcamaları bakımından ayrıntılarıyla değerlendirilmiş ve son olarak tüketim vergilerinin toplam vergi gelirleri içindeki payı, en yaygın tüketim vergisi olan KDV’nin oransal yapısı gibi hususlar çerçevesinde karşılaştırmalar yapılarak birtakım öneriler getirilmiştir.
The United States of America (USA), has no general VAT system, instead levying sales tax, which is similar to VAT, on consumption. Although sales tax causes confusion due to being applied at different rates based on the state and city, the fact that the tax, which is generally applied at very low rates, is applied at even particularly lower rates, in regions where development is foreseen is important.
Another important issue regarding sales tax involves taxable and non-taxable goods and services. The purpose of sales tax is the basic taxation of goods or services other than luxury goods and general needs. This tax only being applied to the end consumer is considered a positive features, as consumption is being taxed in the real sense and is collected at checkout on top of the total price, thus the consumer is aware of the tax amount and rate without the effect of financial anesthesia. On the other hand, sales tax causes a high level of confusion due to states and cities applying different exemptions and tax rates.
Goods and services that may or may not be subject to sales tax vary from state to state. Thus, this study, examines the goods and services to which sales tax is applied in the state of California. The reason for choosing this state is that California has the highest comparative state sales tax rate. The retail sale of tangible goods (e.g., furniture, souvenirs, toys, antiques, and clothing/textiles) is subject to sales tax in California. Goods or services that are not subject to sales tax are classified under five groups: necessities of life, general public benefit, industry benefit, defined exclusions and “other” tax expenditures.
Noteworthily, that the products concerning the necessities of life are excluded from taxation. In fact, food and beverages, being basic necessities, are not taxed as long as they are not sold by being heated (e.g. coffee) and are purchased for consumption or serviced in the facilities, baby diapers, which are a basic need for families with children, are also not subject to sales tax.
Sales tax rates resemble VAT, and in the USA are noteworthily 10% at most. As a matter of fact, when analyzing the percentage of consumption tax to total tax revenues in OECD countries, the USA is seen to have had the lowest rate in 2020 at 15%. In comparison, Chile, Hungary and Latvia had the highest percentages, while alongside the USA, Switzerland and Japan had the lowest; on the other hand, Türkiye, draws attention as the country with the fourth highest rate.
In summary, consumption is seen to be taxed at a very low level in the USA, while being taxed at a very high level in Türkiye. When considering that both societies are consumption societies, taxing certain products in order to reduce consumption can be said to be appropriate. On the other hand, when evaluating VAT rates, Türkiye is generally to have a VAT rate of 30% or higher since it was first implemented in 1985. Also, in terms of tax rates, Türkiye is one of the countries with the highest VAT rates compared to other OECD countries. Even when not taking the latest 2023 regulations on VAT rates, Türkiye can still be said to have high rates.
When considering Türkiye’s tax system is based on indirect taxes and VAT, the practice of excluding goods and services, especially basic foodstuffs and products related to baby care, as in the USA, can be said to be exemplary for regulating income inequality. As a matter of fact, such an application has positive aspects with the idea that applying a single rate on a country-by-country basis will not cause confusion, as Türkiye has no federal system or different city-based tax rate practices, as in the USA.
In terms of Türkiye’s tax system, this study suggests the possibility of applying VAT similarly to sales tax, at low rates and with similar exceptions. However, because this practice will lead to significant income loss as a result of the significant percentage VAT revenues involve, the study emphasizes that basic food, necessities, and products for maintaining life, as well as baby products for families with children, be excluded from taxation. In this way, arrangements can be made that both ensure justice in taxation and reduce income inequality.
