Sales Tax

Michael Addonizio

The most common tax levied on goods or services is the sales tax applied at the retail level of transaction. Used primarily by the states, its popularity is relatively recent. As of 1931, no state levied a retail sales tax (RST). Until that time, states had relied mostly on property taxes, business taxes, excise taxes, and, in a few states, income taxes. By the 1930s, however, state revenue was under pressure, because of both the Depression and a movement to transfer the property tax to local governments. In 1932, Mississippi adopted a 2% retail sales tax as a replacement for a business tax. Seventy years later, sales and use taxes (taxes on use when a customer buys out of state for delivery in the state) now account for about 32% of state government tax collections nationwide, trailing only the individual income tax as a source of revenue. They are imposed ...

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