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Businesses and the Incidence of Sales and Use Taxes

Author

Listed:
  • Frederick W. Derrick

    (Loyola College)

  • Charles E. Scott

    (Loyola College)

Abstract

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.

Suggested Citation

  • Frederick W. Derrick & Charles E. Scott, 1993. "Businesses and the Incidence of Sales and Use Taxes," Public Finance Review, , vol. 21(2), pages 210-226, April.
    • Handle: RePEc:sae:pubfin:v:21:y:1993:i:2:p:210-226
    DOI: 10.1177/109114219302100206
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    References listed on IDEAS

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    1. Fox, William F. & Murray, Matthew N., 1988. "Economic Aspects of Taxing Services," National Tax Journal, National Tax Association, vol. 41(1), pages 19-36, March.
    2. Siegfried, John J. & Smith, Paul A., 1991. "The Distributional Effects of a Sales Tax on Services," National Tax Journal, National Tax Association, vol. 44(1), pages 41-53, March.
    3. Fox, William F. & Murray, Matthew N., 1988. "Economic Aspects of Taxing Services," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(1), pages 19-36, March.
    4. Due, John F. & Mikesell, John L., 1983. "Sales taxation : Johns Hopkins University Press, 1983," Business Horizons, Elsevier, vol. 26(6), pages 83-84.
    5. McElroy, Katherine Maddox & Siegfried, John J & Sweeney, George H, 1982. "The Incidence of Price Changes in the U.S. Economy," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 191-203, May.
    6. Siegfried, John J. & Smith, Paul A., 1991. "The Distributional Effects of a Sales Tax on Services," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(1), pages 41-53, March.
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    Cited by:

    1. Ana-Isabel Guerra & Ferran Sancho, 2013. "A Linear Price Model With Extractions," EcoMod2013 5113, EcoMod.
    2. Ferran Sancho, 2007. "The Total Fiscal Cost of Indirect Taxation: an Approximation Using Catalonia's Recent Input-output Table," UFAE and IAE Working Papers 716.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    3. Derrick, Frederick W. & Scott, Charles E., 1998. "Sales tax equity: Who bears the burden?," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(2), pages 227-237.

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