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Indirect tax
 
 
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The term indirect tax has more than one meaning.

In the colloquial sense, an indirect tax (such as sales tax
Sales tax

A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax....
, value added tax
Value added tax

Value added tax , or goods and services tax , is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade ....
 (VAT), or goods and services tax
Goods and Services Tax

A goods and services tax or value added tax is a tax on exchanges.By country:*Goods and Services Tax *Goods and Services Tax *Goods and Services Tax ...
 (GST)) is a tax
Tax

To tax is to impose a financial charge or other levy upon an individual or Legal person by a state or the functional equivalent of a state.Taxes are also imposed by many subnational entity....
 collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government
Government

Government is the body within any organization that has the authority to make and the power to enforce laws, regulations, or rules. Typically, the government refers to a civil government -- local, provincial, or national -- but commercial, academic, religious, or other formal organizations are also administered by governing bodies....
 with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed.






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The term indirect tax has more than one meaning.

In the colloquial sense, an indirect tax (such as sales tax
Sales tax

A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax....
, value added tax
Value added tax

Value added tax , or goods and services tax , is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade ....
 (VAT), or goods and services tax
Goods and Services Tax

A goods and services tax or value added tax is a tax on exchanges.By country:*Goods and Services Tax *Goods and Services Tax *Goods and Services Tax ...
 (GST)) is a tax
Tax

To tax is to impose a financial charge or other levy upon an individual or Legal person by a state or the functional equivalent of a state.Taxes are also imposed by many subnational entity....
 collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government
Government

Government is the body within any organization that has the authority to make and the power to enforce laws, regulations, or rules. Typically, the government refers to a civil government -- local, provincial, or national -- but commercial, academic, religious, or other formal organizations are also administered by governing bodies....
 with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."

An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on.

In addition, the U.S. Government deems VAT
Vat

Vat and VAT may refer to:* Value added tax* A type of Packaging and labelling such as a barrel , storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...
 to be a direct tax for purposes of the Vienna Convention on Diplomatic Relations
Vienna Convention on Diplomatic Relations

The Vienna Conventions on Diplomatic Relations is an international treaty on diplomacy intercourse and the privileges and Diplomatic immunity of a diplomatic mission....
, as it does the London Congestion Charge so diplomats are exempt. The U.S. Department of State's Office of Foreign Missions operates a reciprocity policy in the matter of sales tax exemption. Another important definitional conflict has simmered at the World Trade Organization in the context of the granting of export tax rebates by the United States (FSC and DISC corporations).

In the early years of the United States, there was strong opposition to the federal government levying direct taxes. As a result, the government resorted to tariffs, an indirect tax.

The term indirect tax has a different meaning for U.S. constitutional law purposes. See Direct tax
Direct tax

The term direct tax has more than one meaning: a colloquial meaning and, in the United States, a constitutional law meaning. Certain taxes may be direct taxes in the colloquial sense but indirect taxes in the constitutional sense....
; see also Excise
Excise

Excise tax, sometimes called an excise Duty , is a type of tax. In the United States, the term "excise" means: any tax other than a property tax or Poll tax , or a tax that is simply called an excise in the language of the statute imposing that tax ....
.

See also

  • Direct tax
    Direct tax

    The term direct tax has more than one meaning: a colloquial meaning and, in the United States, a constitutional law meaning. Certain taxes may be direct taxes in the colloquial sense but indirect taxes in the constitutional sense....
  • United Kingdom Corporation Tax
    United Kingdom corporation tax

    Corporation tax is a tax levied in the United Kingdom on the Profit s made by Company and on the profits of permanent establishments of non-UK resident companies and associations that trade in the EU....
  • Income tax in the United States
    Income tax in the United States

    The Federal government of the United States of the United States imposes a progressive tax on the taxable income of individuals, partnerships, companies, corporations, trusts, Inheritances' estates, and certain bankruptcy estates....