Sales Tax in Canada Term Paper Example | Topics and Well Written Essays - 1750 words

Sales Tax in Canada - Term Paper Example There are various types of taxes such as the income tax, sales tax, import tax and export tax but the discussion in this paper will be based on the sales tax and its impact. Sales tax is levied by a city or state on retail prices of items (Kesselman, 2011). This tax is usually imposed by governments and collected at point of sale with the retailer to collecting and passing the tax to the state (Kesselman, 2011). There are three kinds of sales taxes levied in Canada namely the provincial sales tax PST collected by provinces; goods and services tax which is collected by federal government, Lastly, there is the harmonized sales tax (HST) which combines both PST and GST and is levied in various provinces and then shared out to participating provinces (Sherman, 2009). The rate of sales tax levied is based on various factors which include the product and the place they are being shipped; for instance, publications shipped into any Canadian destination are levied a 5 percent GST although th ey are not subjected to PST (Smart, 2011). The costs incurred in shipment and cargo handling expenses are also subjected to sales taxes. This paper will present three products subjected to sales tax in Canada and evaluate who bears the burden from this budgets. Products subject to sales tax in Canada On 1st July 2010, the harmonized sales tax (HST) was adopted which did away with payment of sales taxes to two governmental levels (Smart, 2011). Previously, eight percent sales tax was paid under the PST while 5 percent was levied by the federal government for various products. Despite the harmonization of the sales taxes, products that were previously not subjected to sales tax remained unaffected as the total sales tax become aggregated (Smart, 2011). The products which are never subjected to sales tax include prescription drugs, basic groceries and municipal transits (Roukhkain, 2011). Clothing and footwear are subjected to sales tax in Canada (Chetty, Looney, and Kroft, 2008). Unde r HST, clothing for adults is subjected to 13 percent in Ontario. The aggregate tax rate is equal to the cumulative sales tax levied before July, 2010 where GST was 5 percent and the PST was 8 percent. Clothing for the children is subjected to a 5 percent sales tax as was the case before HST was adopted as they were exempted from 8 percent PST rate (Roukhkain, 2011). Furthermore, footwear for children are subjected to 5 percent sale tax as shoes beyond size six have a 13 percent sales tax levied on them. The tax system on clothing is based on the age group of their users and it is lower for children clothing to ensure that they are cheap and affordable thereby guaranteeing quality life for them (Smart, 2007). Although not all food products and beverages are subjected to sales tax; others have the tax charged (Smart, 2007). Basic groceries such as meat, vegetable, dairy and canned products are not subjected to sales tax and this has been the case even before HST was adopted. However, snack foods for instance chips and pop corn are charged a 13 percent sale tax. In addition, meals sold in restaurants for more than $ 4 have a 13 sales tax levied. Similarly, alcoholic drinks are also subjected to 13 percent sale tax. These products have a tax levied on them given that they are considered as luxuries and therefore a person enjoying them is well off in the society (Duff, 2003). On the other hand, no tax is levied on basic groceries as they are usually needed for maintenance of life and if sales tax is levied on products in this category, they would become expensive and unaffordable for the poor (Duff, 2003). Motor vehicles and their spare parts are the other products