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Businesses and the Incidence of Sales and Use Taxes

Loyola College

Charles E. Scott

Loyola College

Sales taxes paid by businesses are buried in production costs and therefore hidden from consumers and policymakers. Final (tax included) prices are related to the number of taxable transactions that the good has undergone and who bears the tax as well as to resource costs. Thus the total sales tax embedded in final prices is obscured. This study investigates the level and the incidence of sales taxes applied to business transactions. An input-output model assuming a full pass forward of the tax is employed. The embedded sales tax is more regressive than the direct share paid by consumers and is found in most commodities including those exempted by legislation.

Public Finance Review, Vol. 21, No. 2, 210-226 (1993)
DOI: 10.1177/109114219302100206


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