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Asked by Todd L Ross in
Sales Tax
United States of America

Why don't American stores just add taxes to the price tags?


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Todd L Ross
July 22, 2019 8:17PM

For starters, sales taxes are handled at the state and local levels. Five states don’t have sales taxes: Alaska, Delaware, Montana, Oregon, and New Hampshire. Some states have a high sales tax—currently, Tennessee leads the pack with a hefty 9.47 percent rate. In California, many cities have their own sales taxes, which can push the total rate to over 10 percent.

If a company operates on a large scale, they’d have to price every product on a state-by-state, city-by-city basis to include sales taxes in the total. That’s one headache if they’re putting price stickers onto individual products; it’s another headache entirely if they’re putting the price on the product itself.

A good example: AriZona beverages, which often have a large “99¢" label printed directly onto their cans. To accurately label their products, they’d need to manufacture different cans for different areas.

A main reason: Conventional wisdom holds that consumers generally don’t figure sales tax at the point of sale. If you’re a store owner and you post a lower price, you’ll probably enjoy more sales overall.

Still, though, that’s a matter of choice on the part of the business. In some states (like Washington), it’s a matter of law, as sellers are expressly prohibited from including sales tax in the listed price.

With all of that said, in many countries, the listed price is exactly what you pay, since they’ve got different tax systems and different cultural attitudes toward marketing. In Japan, for instance, most stores show post-tax pricing (though some also show pre-tax pricing, since the country’s sales tax is a rather high 8 percent).

We don’t expect U.S. retailers to change their ways anytime soon. Consider this: If one store decided to start posting full prices with sales tax included, they’d have to explain their unique pricing system to every single customer—and to most business owners, that sounds like a headache.