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> Should shop prices show tax?
Include tax in the purchase price? Read Post.
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Juber3
post Feb 13 2006, 03:51 AM
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OK this is the situation. You are walking along the street with $5.00 in your pocket wanting a double cheeseburger combo meal from Mcdonalds. Anyways, you find you way to Mcdonalds, and see that it is $4.99. Your all like "Neato!" and walk into Mcdonalds. When you order the cashier says that it is actually $5.05, so should they include the whole meal plus tax (either eat in tax, carry out tax, or any other tax on any item..)

This post has been edited by Juber3: Feb 13 2006, 03:52 AM
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Victoria Silverw...
post Feb 13 2006, 04:51 AM
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I have actually seen a few places -- mostly casual restaurants -- do this, with a notice that "all prices include sales tax." It's a nice, if minor, convenience to the consumer.

There are some practical problems with extending this to other purchases. If I buy a "Big Grab" of Doritos, the bag says "99 cents" on it. The retail seller has no good way to indicate what the actual price, which will vary from place to place, will be.

Another reason why many retailers might want to avoid indicating the total price is to minimize the effect of "sticker shock." This would apply more to large purchases. If I want to spend about two hundred bucks on a nice piece of furniture, for example, I might buy it if the price is marked $199, but not if it were marked $216. (Purely a psychological effect, of course, but retailers have to think about such things.)

So, overall, I think it's nice when I don't have to calculate the sales tax for myself, but I can see why many retailers don't do it.
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RedCedar
post Feb 13 2006, 06:37 AM
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I think most people hate the way taxes are generated on a purchase. People really have no clue what their final bills will be. It almost leads to an ambivalent attitude on spending money. After all, you need "around $5 plus or minus a few bucks".

So people are in a sort of limbo, they'll just carry 10s and 20s because you never know what the cost of what you're buying will actually end up being.

I think people would freak if we ever went to a system that doesn't add taxes. They would say "why didn't we do this before, we were foolish not to!". It's like the metric system, people are born learning 12 inches is one foot. We have an inbred illogical logic, just like adapting to adding taxes.

We're accustomed to a goofy system.


Fwiw, Europeans complain as well, because they don't do that in Europe.

This post has been edited by RedCedar: Feb 13 2006, 06:40 AM
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Curmudgeon
post Feb 13 2006, 12:07 PM
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QUOTE(Juber3 @ Feb 12 2006, 10:51 PM)
OK this is the situation. You are walking along the street with $5.00 in your pocket wanting a double cheeseburger combo meal from Mcdonalds. Anyways, you find you way to Mcdonalds, and see that it is $4.99. Your all like "Neato!" and walk into Mcdonalds. When you order the cashier says that it is actually $5.05, so should they include the whole meal plus tax (either eat in tax, carry out tax, or any other tax on any item..)
*


Let's see, locally the sales tax is 6% on most items. That amounts to 6 cents on every dollar, and the $4.99 meal would cost you 6 cents X 5 plus $4.99 is a simply calculated $5.29. I learned to calculate percentages in elementary school. If is too hard to calculate in your head, pocket size calculators can be purchased in the dollar stores for $1.06.

If on the other hand, the tax is precalculated, when you purchase more than one item, it is likely that the tax will have been rounded up to the nearest penny on each item. The customer will pay a little extra tax, and the merchant computing his taxes due will likely compute an actual percentage of gross sales. The result, I suspect would be higher prices to the consumer, and lower revenues forwarded to the state.

I would tend to avoid businesses that priced their goods in such a fashion.
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Carlsen
post Feb 13 2006, 12:28 PM
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Well, from a European perspective, sales tax should be included in the advertized price.

Here in Denmark its illegal to advertize prizes not including sales tax, when these adverts are targeted to private consumers, and most are.

I understand it may not be so easy in the USA, since every state have their own sales tax or none at all, but still, it shouldn't be that hard to incorporate in these modern days. If I were ever to buy a burger advertized as $4.99 and the shopkeeper asks me for $5.29 I would probably refuse to pay on principle and walk away - as I see it, its the company the have to pay the sales tax on to the government, so they should incorporate that expenditure into their final price, and not pass it on to the consumer to calculate, while the seller get the advantage of marketing a lower price which isn't correct.
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Julian
post Feb 13 2006, 01:59 PM
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When I first read the headline on the "New Posts" page, I thought this would be about getting store owners to display a tax breakdown on their goods - "This item costs $1.99 of which 30c is tax" - that kind of thing.

I think that would be a great idea - in fact, I'd go even further, and legislate to make retailers display their average net margin, so shoppers could compare how much, or how little, they are being [s]fleeced[/a], sorry, charged for intangibles like service, range, convenience, etc.

However, the thread is just about including sales taxes on the ticket price.

The reason I assumed it was about breaking tax down visibly and separately is because, like Carlsen, sales taxes are legally required to be included in the ticket price.

I may be wrong, but I think that's the case thoughout the EU, since almost all the sales taxes we have are Value Added Tax ("VAT"), except on excise duties (fuel, tobacco, alcohol). Across the board, the prices are all marked at the level you will actually pay, rather than at the level the person operating the checkout will calculate the tax.

From what I can tell, this is the only purpose of marking the prices net of tax - it makes it really easy for the store to calculate the correct tax at the checkout. And really hard for the shopper to know what they will have to pay.

Given that in practically every other area of retailing, America leads the world in service levels, I find it surprising that such a basic thing as pricing is constructed to make life easier for the store than for the customer.

So yes, I think marked prices should include all taxes and other non-optional charges, and I'm surprised that America is even still having the discussion. Just do it!

But there is a downside. Once taxes are included, you can't tell how much you're paying. (In the UK, you can, but only after you've paid; till receipts show the tax element separately.)

So it's easy for governments to hide tax increases if you aren't careful, especially if the sales tax system is complex. (UK VAT is pretty much a flat rate, it just doesn't apply to certain goods or services; food, children's clothing, printed matter, etc.)

It also easy for manufacturers to do so. Friends of mine work in the tobacco and petrol trades, and he LOVES the fact that governments put taxes on their products that never get broken down on ticket prices, because every new tax year they can pad their margins by bumping up prices even if costs have gone down, and everyone will blame the government for increasing tax!

This is the reason I'd like to see a cost breakdown on items - how much is the retailer getting, how much is the manufacturer and any other intermediary getting, how much is tax, how much is profit etc., in the same way we have nutritional breakdowns on food these days. I think consumer markets always work better with more information (but not necessarily with more choice).
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AuthorMusician
post Feb 13 2006, 02:53 PM
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Not only do we have state sales tax, cities and towns have them too. The Mac meal would then be cheaper or more expensive depending on where you get it. On big ticket items it might be worth while to buy in a different place.

Putting the full price on something won't make me not buy it if I need the product. Shopping around for a lower price may or may not make sense, depending on how much gas and time this is going to take. I'm not considering Internet purchases because there's so much automation now that finding a low price is very easy. So if it were up to me, I'm in favor of full pricing.

I love it when something is marked 4.99, as if the number 5 is evil. I still round up anyway, so what's the point? It's 5. Don't be so coy, and I know that the tax will be somewhere near 10%, so it's 5.50 or a little less. Maybe a little more, it depends. The question then becomes do I need this thing 5.50 to maybe 5.75 worth? Good marketing would try to convince me of that, so forget about the price.

Here I am in a fast food place. All I've got is $5, so what to do? Ordering the 3.99 item would generally be safe, which leaves 25% in case the tax is extremely high.
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Amlord
post Feb 13 2006, 04:03 PM
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Should shop prices show tax?

No, they should not.

As our European friends have pointed out, they do this in the EU. Why, one may ask?

To hide from the public the extra cost the government adds to the price of goods and services. When the purchaser does not have a transparent view of how much the item costs versus how much the government is charging you for buying it, the government is free to keep raising the tax knowing that the average consumer will not realize that the reason your $5.25 burger meal is suddenly $5.35 is that the government has bumped up the taxes.

Julian informs us that when businesses raise prices (either do to cost of business change or tax change) many people assume the government is raising the tax. This allows the business to pad the increase and pass the blame onto the government.

In other words, the actual accounting of who is getting the money from the purchase is obscured. Uninformed customers (of goods, services, or government) are a bad thing. I would think by now most people in the US know that the price of something does not include tax and will know they need some extra cash to account for that (7% for local and state taxes in my county).
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Carlsen
post Feb 13 2006, 08:21 PM
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QUOTE(Amlord @ Feb 13 2006, 05:03 PM)
Should shop prices show tax?

To hide from the public the extra cost the government adds to the price of goods and services.  When the purchaser does not have a transparent view of how much the item costs versus how much the government is charging you for buying it, the government is free to keep raising the tax knowing that the average consumer will not realize that the reason your $5.25 burger meal is suddenly $5.35 is that the government has bumped up the taxes.
*


In Denmark it is required that the VAT procentage and VAT amount is listed seperately on the receipt, so we are always able to tell how much goes to the government. The VAT procentage is also very easy to remember here, as it is the same on all goods, and a raising of it would certainly be noticed, I can assure you.
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Bikerdad
post Feb 13 2006, 08:24 PM
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I voted "No."

When I get my paycheck, I know how much of my labor has gone to Uncle Sam. When I by something retail, I know exactly how much is going to Cousin Kenny.

When I was a kid, our sales tax (which is a combination of state and county) was 4%. Its 7.75% now....

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Just Leave me Al...
post Feb 14 2006, 05:00 AM
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I voted yes for the simple reason that it would eliminate the penny from existence. How much time and energy is wasted rolling, carrying, sorting, and replacing those stupid things? All store prices would at least then be set to the nickle because they don't like dealing with them either I imagine.
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slim
post Feb 14 2006, 05:12 AM
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I voted yes. I work at a theater, and all prices are listed including tax. As a result, we price everything in 25 cent increments, and we only have to keep quarters for change. Makes things easier and quicker on everybody.
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Wertz
post Feb 14 2006, 08:11 AM
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There are two main reasons that retailers don't include sales tax in their prices. The first, as has been stated, is that $1.99 "looks" cheaper than $2.11 - and $1999.99 looks a lot cheaper than $2120.00.

The other reason makes a bit more sense. Most national retailers - any chain store that operates in more than one state - set their prices from the head office. Indeed, most price stickers, barcodes, and SKUs are generated from a central office. As the sales tax varies from state to state, from 2.9% to 7.25%, it is left to each location to add the state tax themselves - at the register. In short, it's more of a challenge to include the tax in the price here than it is in Europe, where the tax is the same for the entire country.

That said, I would much prefer retailers to include the tax in the price. Frankly, I find the whole notion of charging prices like $19.95 or $149.99 to be slightly insulting (for me, the psychology is reversed - like, you think I'm going to be duped by that lack of a few cents the price?) and, in terms of calculating the tax, more than a little irritating. I hate decimals and, as my tax here is 6.5%, I have to contend with two sets of them on $1.95. Just charge me two bucks.

As someone currently working in retail sales, I usually answer price inquiries by rounding up - "$300 plus tax" rather than "$299.99". Were I a national distributor, I'd just round the figure off to include the tax - $2.10, say, rather than $1.99 - and let the local venues deduct the appropriate tax. In states with 4.5%, the local retailer would make a bit more. In states with 6.5% or 7%, the local retailer would make a little less. As a conscionable distributor, I'd come up with some way of off-setting the difference in the higher taxed states - a rebate based on total monthly sales or whatever.

Were there the corporate will, I'm sure that the inclusion of sales tax in prices could be solved in a variety of ways. It would be a boon for American consumers - and European visitors (with whom I contend on a daily basis) would be a lot less baffled and annoyed.
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Paladin Elspeth
post Feb 14 2006, 09:38 AM
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Yes, I think the sales tax should be included on sticker prices. Not only is it confusing to foreigners when they hear the price plus tax after reading the sticker, it is hard on any traveler who doesn't know the local tax in a given business district or the state next door to their own.

If you have plenty of money to pay for what you are purchasing, it's not that much of a problem. But if you don't have so much money and it becomes evident at the cash register that you do not have enough, it is awkward and frustrating. You feel a little like a kid who has to go back to Mom or Dad after successfully obtaining what s/he thinks is enough money to buy a toy or a present, only to end up a few to several cents short.

Having the taxes added to the price on the sticker might be more discouraging for some consumers when they see the real price, but then again, they know the real price.

Alternatively, businesses should post the sales tax at or near the register so that consumers can be sure of what they are supposed to be charged.

This post has been edited by Paladin Elspeth: Feb 14 2006, 09:39 AM
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slim
post Feb 14 2006, 09:48 AM
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QUOTE(Wertz @ Feb 14 2006, 01:11 AM)
The other reason makes a bit more sense. Most national retailers - any chain store that operates in more than one state - set their prices from the head office. Indeed, most price stickers, barcodes, and SKUs are generated from a central office. As the sales tax varies from state to state, from 2.9% to 7.25%, it is left to each location to add the state tax themselves - at the register. In short, it's more of a challenge to include the tax in the price here than it is in Europe, where the tax is the same for the entire country.

*



But these same retailers don't have a problem selling things at one price in 'A' city and a different price in 'B' community. How much harder would it be to incorporate the tax rate (which they, or someobody up the food chain, already know) into their tags/advertising?
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RedCedar
post Feb 14 2006, 03:05 PM
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QUOTE(Curmudgeon @ Feb 13 2006, 07:07 AM)
QUOTE(Juber3 @ Feb 12 2006, 10:51 PM)
OK this is the situation. You are walking along the street with $5.00 in your pocket wanting a double cheeseburger combo meal from Mcdonalds. Anyways, you find you way to Mcdonalds, and see that it is $4.99. Your all like "Neato!" and walk into Mcdonalds. When you order the cashier says that it is actually $5.05, so should they include the whole meal plus tax (either eat in tax, carry out tax, or any other tax on any item..)
*


Let's see, locally the sales tax is 6% on most items. That amounts to 6 cents on every dollar, and the $4.99 meal would cost you 6 cents X 5 plus $4.99 is a simply calculated $5.29. I learned to calculate percentages in elementary school. If is too hard to calculate in your head, pocket size calculators can be purchased in the dollar stores for $1.06.

If on the other hand, the tax is precalculated, when you purchase more than one item, it is likely that the tax will have been rounded up to the nearest penny on each item. The customer will pay a little extra tax, and the merchant computing his taxes due will likely compute an actual percentage of gross sales. The result, I suspect would be higher prices to the consumer, and lower revenues forwarded to the state.

I would tend to avoid businesses that priced their goods in such a fashion.
*




Ok, quickly now, what's the tax on a purchase of $183.46 ?

Or how about $13.86?

I don't do math in my head that quickly. Most people don't either. And that's the point, it would make things simpler, you wouldn't have to do the math.
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Juber3
post Feb 14 2006, 06:47 PM
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Wow quite a popular topic for casual convo. Anyways, I think that they should include it in the sticker price. One time I walked into a Local dollar store eager to purchase some shaving cream. I walked in and picked up 2 bottles with $2.98 each. I was all like cool, I got up to the register and she started to scan the bottles (2.98*2)(7.5%).. And guess what, I didnt have enough money.. I felt sooo embarassed...
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