No item can be taxed twice?

Question

There is a tax law stating that no item can be taxed twice (example; the store bought and paid taxes on the bananas so the customer should not have to pay taxes when purchased at the store) Does anyone have info on this law and/or what it is called? Or where I might be able to find information on tax laws?

Answer 1

Normally sales and use tax are only taxed on a final sale not a wholesale transaction. In your example the store would have provided their vendor a "resale certificate" which would have exempted them from paying sales tax on the bananas.  Then when they resell the bananas to a customer they would collect the sales tax from the customer. The tax is on the transaction between the store and the final customer.

The tax is on the sale of the item (the transaction), not the item itself.  For example if you buy a new car from a dealer you will pay sales tax.  If you then resell the car as a used car the new buyer also pays sales tax.  That is sales tax paid twice for the same product, but the tax is on the transaction not the car so it wouldn't be considered a double tax.

To make myself clear, the tax is on the transaction, not the item. A transaction (sale) of certain products is taxable and continues to be taxable even if the particular items to be sold where part of a previous taxable transaction.

Answer 2

There is no such US law.

Stores generally purchases items tax exempt for resale purposes.  When we purchases items at retail, we (the end-user) pays sales tax unless we have a valid exemption (99.99% of end-users do not).

If, for whatever reason, the store paid taxes on their wholesale purchase, they still must charge sales tax to the end user.

Your question relates to sales taxes which are at the state level.  You would have to research at the state's department of revenue website.  There is no website that has the rules for every state.

Answer 3

No, there is no such law.  In fact, virtually everything will have some level of double taxation in it.

For instance, transportation will involve fuel costs, which are part of what the trucker charges to the customer.  Part of that cost is taxation.  So part of the wholesale (delivered to the store) cost of the item has already been taxed.  Retail tax is then added to the final cost of the item, so there is a single example of tax on tax.  Similarly, part of the accounting for the markup the retail store adds is to cover their payroll taxes that they pay.  Again, that is tax to cover tax.

All the way back down the supply chain, similar things happen.  Import tax, excise taxes, fuel taxes, payroll taxes.  All get added in to the price charged to the next link in the chain.  Yes, some are offset via input tax credits, but many are not.

So in reality, there are many examples of double, triple, even more, taxation.