No provisions exist for a sales tax or value-added tax (VAT) at the federal level; however, sales and use taxes constitute a major revenue source for the 45 states that impose such taxes and the District of Columbia. Sales and use tax rates vary from state to state and generally range from 2.9% to 7.25% at the state level. Most states also allow a 'local option' that permits local jurisdictions, such as cities and counties, to impose an additional percentage on top of the state-level tax and to keep the related revenues.
In general, a sales tax is a tax applied to the retail sale of tangible personal property and certain digital products and enumerated services. Although the form of the tax may vary, it is usually imposed directly upon the receipts from the retail sale of the taxable item. The person engaged in the business of making retail sales of the taxable item generally collects the sales tax from the purchaser and remits such amounts to the state. The use tax complements the sales tax and is usually assessed on purchases made out of state and brought into the jurisdiction for use, storage, or consumption. Typically, either a sales tax or a use tax can be assessed on a transaction, but not both.
The states generally impose a sales tax collection and remission liability on a seller once a minimum threshold is met with respect to either the number of sales transactions into or within a state or the dollar amount of sales into or within a state.
Liability for state and local sales taxes was governed by a physical presence nexus standard prior to the US Supreme Court's decision South Dakota v. Wayfair (21 June 2018). That decision voided the physical presence nexus standard and upheld South Dakota's statutory nexus standard of delivery into the state of more than USD 100,000 of sales or 200 or more transactions. Since the decision, most states that impose sales taxes have adopted similar standards.
Customs duties and import tariffs
All goods imported into the United States are subject to entry and are dutiable or duty-free in accordance with their classification under the applicable items in the Harmonized Tariff Schedule of the United States. The classification also identifies eligibility for special programs and free trade agreement preferential duty rates. The President has authority under US law to increase tariffs in certain cases (e.g., to address national security concerns).
When goods are dutiable on an 'ordinary' basis, ad valorem, specific, or compound duty rates may be assessed. An ad valorem rate, which is the type of duty mechanism most often applied, identifies the percentage of tax that will be assessed on the value of the merchandise, such as 7% ad valorem. A specific rate is a specified amount per unit of weight or other quantity, such as 6.8 cents per dozen. A compound rate is a combination of both an ad valorem rate and a specific rate, such as 0.8 cents per kilo plus 8% ad valorem. In addition to ordinary duties, select products also may be subject to punitive tariffs that are imposed in response to specific trading conditions and for specified time periods. In such cases, the punitive tariffs are assessed in addition to the ordinary duties. Customs requires that the value of the goods be properly declared regardless of the dutiable status of the merchandise.
Liability for the payment of duty and other customs fees becomes fixed at the time an entry is filed with US Customs and Border Protection (CBP), although the amount of duty owed may change subsequently if any of the information declared on entry is later determined to be erroneous. The obligation for payment is upon the person or firm in whose name the entry is filed, the importer of record.
Excise taxes (including retail excise taxes) are generally imposed by the federal and state governments on a wide range of goods and activities, including gasoline, kerosene, and diesel fuel used for transportation, air transportation, wagering, foreign insurance, ozone depleting chemicals (or products manufactured using ozone depleting chemicals), manufacturing/importing of specified goods (e.g. certain sporting goods, tires, firearms and ammunition, alcohol, and tobacco), and selling certain goods at retail (e.g. heavy vehicles, trailers, bodies, and chassis). See the Environmental tax section below for further detail regarding the excise taxes levied on ozone depleting chemicals (or products manufactured using ozone depleting chemicals), among other goods and activities.
The excise tax rates are as varied as the goods and activities upon which they are levied. For example, a federal excise tax of 7.5% is levied on domestic commercial air passenger transportation, whereas the federal excise tax imposed on motor fuel generally is 18.3 cents per gallon of gasoline (plus 0.1 cents per gallon Leaking Underground Storage Tank [LUST] tax) and 24.3 cents per gallon of diesel fuel (plus 0.1 cents per gallon LUST tax). The federal excise tax imposed on the first retail sale, lease, or use of heavy vehicles, trailers, bodies, chassis, etc. is 12%. These taxes usually are imposed on the manufacturer, importer, retailer, or provider of the goods and activities and then passed through to the purchaser.
Many states and local governments impose a variety of property taxes on real property. Most states also impose a tax on business personal property.
Stamp taxes are not generally relevant at the federal level, except for the federal stamp tax imposed on the transfer of National Firearms Act (NFA) firearms. State and local governments frequently impose stamp taxes at the time of officially recording a transaction involving real property (commonly referred to as transfer taxes). Such taxes generally are based upon the value of the real property being transferred. The tax generally is imposed on the direct sale of real property, but some state and local governments also impose such a tax on the sale of a controlling interest of real property, which is the sale of a direct or indirect ownership of the real property. Many state and local governments also impose stamp taxes on certain goods made available for sale in the respective jurisdiction, like cigarettes and other tobacco products.
Accumulated earnings tax
Corporations (other than S corporations, domestic and foreign personal holding companies, corporations exempt from tax under Subchapter F of the Code, and passive foreign investment companies) accumulating earnings and profits for the purpose of avoiding shareholder personal income tax (PIT) are subject to a penalty tax in addition to any other tax that may be applicable. The accumulated earnings tax is equal to 20% of 'accumulated taxable income'. Generally, accumulated taxable income is the excess of taxable income with certain adjustments, including a deduction for regular income taxes, over the dividends paid deduction and the accumulated earnings credit. Note that a corporation can justify the accumulation of income, and avoid tax, based on its reasonable business needs.
Personal holding company tax
US corporations and certain foreign corporations that receive substantial 'passive income' and are 'closely held' may be subject to personal holding company tax. The personal holding company tax is 20% of undistributed personal holding company income and is levied in addition to the regular tax.
Employers generally are subject to federal unemployment tax (FUTA) of 6% on the first USD 7,000 of wages paid to employees meeting certain criteria, with potential reduction of up to 5.4% for state unemployment taxes. For 2021, employers also are subject to social security tax of 6.2% on the first USD 142,800 (up from USD 137,700 in 2020) of wages paid to employees and Medicare tax of 1.45% on all wages (collectively, FICA taxes). For 2022, social security tax is imposed on the first USD 147,000 of wages paid to employees. Employers are required to withhold an equivalent amount of FICA taxes from employee wages, federal income tax at graduated rates, and Additional Medicare tax of 0.9% on wages in excess of USD 200,000. In addition, states may impose state income tax, state unemployment tax, workers' compensation insurance tax, and other state-level benefit requirements at varying rates depending on state law and the nature of employees' activities. The federal supplemental withholding rates, when applicable, are at 22% on supplemental income below USD 1 million in the aggregate and 37% on supplemental income in excess of USD 1 million in the aggregate for 2021 and 2022.
Importers, manufacturers, and sellers of ozone-depleting chemicals (ODCs), or imported products manufactured using ODCs, are subject to environmental taxes calculated per weight of the ODC. These taxes are reported on Forms 6627 and 720. The ODC tax on imported taxable products is determined under an exact method by weight or via the table method based on the listed product (such table is provided in the instructions to Form 6627). If the weight cannot be determined, the tax is 1% of the entry value of the product. There also is a tax on crude oil and petroleum products (the oil spill liability tax) that was reinstated beginning 1 January 2021, and currently expires on 31 December 2025. The tax is imposed on operators of refineries that receive crude oil; petroleum products entered into the United States for consumption, use, or warehousing; and users or exporters of crude oil before a prior imposition of oil spill tax.
The Infrastructure Investment and Jobs Act, enacted on 15 November 2021, reinstated certain chemical excise taxes. These excise taxes are commonly referred to as “Superfund Taxes” and are imposed on the first sale or use of certain chemicals and substances. The taxes were reinstated effective 1 July 2022 (these taxes had previously expired in 1995). In general, section 4661 imposes on manufacturers, importers, and producers a per ton federal excise tax on the first sale or use of 42 enumerated chemicals (“taxable chemicals”). Section 4671 imposes taxes on an importer’s sale or use of a list of specified substances (“taxable substances”) that are produced using these taxable chemicals. The taxes are reported on Forms 6627 and 720, and rates of tax on taxable chemicals range from $0.44 to $9.74 per short ton (2,000 lbs.). Taxable substances are taxed based upon their underlying chemicals. The taxes currently expire on 31 December 2031.
Other state and municipal taxes
Other taxes that states may impose, in lieu of or in addition to taxes based on income, include franchise taxes and taxes on the capital of a corporation. State and municipal taxes are deductible expenses for federal income tax purposes.