Indirect Tax

There are different types of taxes, which are levied by the national governments on the individuals and corporate houses. At the same time, there are many other taxes, which are imposed on property and even on trades. These taxes are basically of two types, direct and indirect.
The indirect taxes are those taxes, which are not paid directly to the national government. These taxes are collected by some intermediaries from the taxpayers and then the money is deposited in the treasuries. Indirect tax can be defined in two ways. In the conversational sense, the term refers to all those taxes like the sales tax, value added tax and goods and services tax, which are not paid directly to the government.

For the purpose of collection of all these taxes, retailers are employed. On the other hand, the definition of indirect taxes according to the US constitution is totally different.

According to the constitution of the United States of America, the indirect tax is a kind of event tax. For this reason, the excise is also considered as a kind of indirect tax. Excise is that type of indirect tax, which is levied on goods that are produced inside the territorial boundary of a country.
Again, gift tax or estate tax is also considered as an indirect tax in the United States of America.

Vat or value added tax is another special form of indirect tax. It is also called the goods and services tax. This tax is imposed on the exchange of commodities. The value added tax is levied on the added value at each stage of production. In this respect, Value added tax is totally different from the sales tax. This tax is collected from the sellers but in reality the tax is paid by the customers.

Sales tax is also a kind of indirect tax. This tax is levied on the consumption of a particular product or commodity. Sales tax is charged by the seller at the time of transaction. Usually, the national government determines the exact percentage of the original price of the commodity that can be charged as sales tax. These taxes are sometimes added in the selling price of the commodity and at certain times, the seller in accordance with the law, charges the tax.

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Last Updated on : 5th July 2013