Frequently Asked Questions

What is the difference between cash discount and sales tax?

A cash discount is an amount deducted from the stated selling price of an item at time of purchase. Sales Tax is an additional charge levied by states on the retailer who then passes it to the customer.

Who pays sales tax?

The seller currently collects sales tax for certain products and services.

When is sales tax collected?

Sales tax is collected on every sale that’s taxable (this includes most retail sales).

How do you calculate the taxable amount on a taxable item?

To determine the taxable price, multiply the list price by the state's percentage of taxation and add any additional local taxes.

Given the same gross amount, which tax will a merchant pay more for?

Generally speaking, a cash discount is deducted from a merchant's gross revenue whereas sales tax and VAT are levied on a merchant's gross revenue.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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