What we say
Sales tax is a tax on all retail goods and services. Sales tax rates are collected by the retailer and passed on to the state, thus each state sets their own sales tax rate.
What Macklemore says (in his song, Thrift Shop)
"I'm gonna pop some tags
Only got 20 dollars in my pocket
I'm hunting, looking for a come up
This is awesome"
What we can learn about sales tax
If you’re only wanting to spend a certain amount on something, don’t follow Macklemore’s lead and start “popping tags,” maybe just consider what state you’re buying in. Why? Not all states have sales tax.
Let’s say you’re thinking about buying a car. Instead of spending all your time deciding on a Honda or Hyundai or Hybrid, maybe you should spend more time thinking about if you’re buying it in New Jersey, New York, or New Hampshire. A $20,000 car in New York (a state that charges sales tax) would actually cost around $21,600, but a $20,000 car in New Hampshire (a state with no sales tax) would cost exactly that.
Sales tax isn’t all bad, the money collected from it often supports local governments and public initiatives like roads, schools, and utilities.
The financial lessons
1. Benjamin Franklin once said, “In this world, nothing can be said to be certain except for death and taxes.” Unless you live in a zero sales tax state (Alaska, Montana, Oregon, New Hampshire, or Delaware), sales tax is unavoidable even if you order online!
2. Living in a state with zero sales tax may seem like a hot idea, but often those states have higher income and property taxes to make up for it. The point? Live where you want to live and stop being a money miser!
Check out a playlist of tunes related to this week’s topic below!