44

On a recent trip to San Francisco it was always a surprise to see what to pay in stores. It was never as simple as just adding all the published prices. There was always the addition of taxes. Sometimes it was just an additional 50ct, but sometimes the increase in price was substantial. The most extreme case being a bag of apples with a advertised price of 1.99 but a final price of 4.50. Isn't there a single VAT and how can I know the price to expect? If the taxes apply to everyone, why not simply publish the price including taxes?

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    Tax will never double the price of an item. Most likely the apples were 1.99 per pound, and you bought a 2+ pound bag of them. Most food like apples would actually be tax free. – Doc Oct 27 '13 at 9:14
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    This isn't specific to San Francisco. This is basically the way prices work everywhere in the USA. – Fake Name Oct 27 '13 at 9:39
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    I was amazed by this as well when visiting the USA. In Europe, the price is not printed on the product (because of course, it may be more expensive in some stores than in others), but at the shelf. In the computer age, there is no reason whatsoever why each store can't label the actual customer prices on the shelf. They don't do it because it's legal not to do it. – gerrit Oct 27 '13 at 20:03
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    Almost certainly your bag of applies was $1.99 PER POUND. The bag weighed a little over 2 lbs, plus ~8% tax brings you to $4.50. – Doc Dec 17 '15 at 23:54
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    There is no sales tax on uncooked food in California (nor most other parts of the USA). I agree that this was almost certainly a per-pound price. – Andrew Lazarus Dec 18 '15 at 23:23
30

There is no general VAT in the US but various sales taxes, which means that there isn't a single tax rate that shops could easily include in all prices. Depending on the location, there could be a sales tax from the state, county, city or even other institutions (transport authorities, etc.) so you cannot even set a price and print labels for a state or a metropolitan area, let alone nationwide.

Also, displaying lower prices is generally advantageous so as long as they don't have to do it, it would seem retailers have very little incentive to figure a way to deal with all this. Even if one would consider doing it (which is not the case as far as I know), they would just make themselves look bad compared to the competition. To use an analogy, even when several parties really wish to reduce their weapon stockpiles, it's too risky for one of them to disarm unilaterally and find itself alone without weapons when the others still have them (or in this case, display higher after-tax prices when everybody else advertises with before-tax prices).

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    Ah, comparing apples and guns :) – Bernhard Oct 27 '13 at 11:21
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    San Francisco sales tax is 8.75%; but the rate varies from one town to the next (ex nearby Berkley and San Mateo are 9.0 and 9.25% respectively). Some items, including Unprepared food, bakery items, and hot beverages, are exempt from sales tax. boe.ca.gov/cgi-bin/rates.cgi?LETTER=S&LIST=CITY – Dan Neely Oct 27 '13 at 13:12
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    so you cannot even set a price and print labels for a state or a metropolitan area, let alone nationwide Don't they have computers? Surely it would be easy to display different prices in different stores? If it's known at checkout, it should be known at the shelves of the store or — at least — using some kind of in-store portable scanner. I rather think the reason is your second point: if retailers can advertise a price lower than the real one, they'll do so. Plenty of products in i.e. Sweden cost more in one store than in another, simply because the other store is more remote. – gerrit Oct 27 '13 at 19:59
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    @MichaelHampton Don't worry, people manage to complain about taxes everywhere. In any case, it's easy to show both (it's the case in cash-and-carry shops in Europe because businesses don't pay the VAT) and the price without tax is generally printed on the receipt even in countries where the full prices is displayed in the shelves. Also: your taxes are too low. – Relaxed Oct 28 '13 at 1:30
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    Aren't taxes always to high, no matter the percentage ;) – user141 Oct 28 '13 at 1:35
15

I would say that because the law is not on the consumer side in the USA and therefore does not require the total price to be displayed.

Most shops will therefore leave off taxes etc as you are then more likely to buy an item. (Trustworthily companies loose trade due to other companies misleading consumers on prices, so therefore quickly all the companies become as bad as each other.)

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    I don't see how such a law would favor the consumer. There is very small gain from knowing the exact item price, while the considerable cost of implementing this across many U.S. tax regimes would be passed on to the consumer. There's nothing deceptive about the practice as long as it is clear that tax is not included. Requiring tax to be included in prices favors government more than anyone, since you notice the amount of tax you are paying far less. – user35890 Aug 10 '16 at 15:35
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    @dan1111: This sounds like you have become so used to the practice, you don't see how it hurts you. There is a consumer gain to knowing the exact item price. For example, I can ready my exact change while waiting in the queue, except in regions in the USA. The costs of implementing this are already born by the shopkeeper at the till - the question is merely what the price tag says. – Oddthinking Aug 30 '16 at 2:24
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    @Oddthinking I have experienced both systems, having lived for a number of years in Britain. Being able to get your exact change ready is what I meant by "very small gain". That doesn't come close to justifying the significant implementation cost this would have in the USA, in my opinion. – user35890 Aug 30 '16 at 6:26
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    "The costs of implementing this are already born by the shopkeeper at the till" - no. It's easy to make the final price at the till reflect the local tax jurisdiction. It would be much harder to make store-wide pricing labels, plus things like websites, flyers, and items with the price pre-printed on them, vary appropriately so that they show the full price including tax in each different locale. – user35890 Aug 31 '16 at 11:44
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    it's mandatory in europe and no store has died for spending 20 dollars on a new ticketing machine paper roll, the "llittle gain" argument is obnoxious. with mandatory final price tag, you can't be scammed, lied, or pursued to purchase a product you later can find to be a dollar, or 100 dollars ( car, telelevision, furniture ...) more expensive than that other store that was just 5$ more expensive, but where those were the final prices. – CptEric Oct 4 '16 at 12:52
6

One of the reasons this is done by sellers is so that consumers know who to blame for the prices they are paying. In particular, the seller wants the consumer to know that it is not the seller's fault that the product costs 10% more than it needs to (or whatever the rate is). Thus, the seller lists how much of the total price is attributable to sales tax so that the consumer knows that at least that portion of the price is attributable to the government. This is explained in greater detail below.

Sales taxes (and VATs) are levied on sellers, not on consumers. However, if the seller is going to have to pay a tax for selling you the product, they are going to have to charge more for the product in order to offset this additional cost to them. Specifically, if the tax costs the seller $X, then the seller is going to have to increase the price of the product by $X in order to break even. However, recognizing that consumers are price-sensitive and that they will not be happy about paying $X more for the product, the seller wishes to direct this consumer angst away from themselves. In essence, the seller is trying to protect themselves from the backlash resulting from the higher price by pointing out that they are not the reason for the higher price, the government is the reason.

In furtherance of the goal of directing consumer angst away from themselves and toward the government, the seller advertises the "pre-tax" price. This communicates to the consumer how much the seller would have been willing to sell the product for if only they didn't have to pay that darned tax.

Of course, the above-explains why the seller wants to list separately the pre-tax price and the amount attributable to tax, but it doesn't explain why the seller does not also list the post-tax price in addition to the other information. This, I assume, is done because the sellers believe that listing the higher price will have a negative effect on buying decisions. Sellers believe that consumers are affected emotionally by the listed prices, even when the consumer knows logically what the ultimate price will be. In particular, sellers believe that, even if a consumer logically knows that the ultimate price will be $Y, they will be more emotionally inclined to purchase the product if what they see on the label is less than $Y. The theory is that at least part of the emotional reaction of the consumer is tied to the price as seen, even when the consumer knows that price will increase at checkout. This is the same reason sellers prefer the ".99" format (i.e., $9.99 is preferred to $10.00), because they believe a buyer who sees $9.99 will be more emotionally receptive than one who sees $10.00, even though logically the prices are essentially the same. Thus, if listing the total (tax included) price makes consumers less emotionally receptive to the product, then sellers will be inclined to not list the total price if they can avoid it.

In addition, listing three pricing information items (base price, sales tax, total price) next to each product might not be desirable (or even feasible) in certain settings, such as limited space settings (e.g., menu board of a fast-food restaraunt). If there is only room for one priceing infomration item, then the seller is obviously going to favor the lower number.

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    This argument seems flimsy because it isn't applied to other costs that the seller must bear. They don't say "Apples are $1.99 plus sale tax plus bank transaction fee, wages, land tax, rent, etc." – Oddthinking Aug 30 '16 at 2:20
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    @Oddthinking There's not much that can be done for transaction fees, wages, etc. Those things are settled by the market. Taxes though can easily be changed by passing a law, and a tax is not a market force, and something citizens can have some control over. – Andy Dec 4 '16 at 22:28
4

As pointed out by others, its the fact that consumer protections are weaker in the USA, and since consumers are now used to it, and do not realise that they are probably spending more than they probably would otherwise with full price, there is very little incentive to change.

The retailers have no incentive to change, since the complaints are from a minority of consumers, the government has also no incentive as full price would perhaps impact consumption negatively at first, and consumers do not have a loud voice on this as they are mostly accustomed to it.

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    -1 Explain how a consumer is harmed by not including the amount of tax in the list price. – Andy Dec 4 '16 at 22:29
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    @Andy: if you have a fixed budget, you can't tell how many of item A you can buy. That's sort of the basic function of a printed price. How can consumers learn to spend responsibly if the actual amount they'll have to pay can only be guessed. – RemcoGerlich Dec 5 '16 at 8:47
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    @RemcoGerlich It's amazing how many people judge from a distance. Its a non-issue here, since people are aware of the existence of the sales tax and typically know the exact percentage (it's not like the rates change from building to building). Where I live, the state sales tax is 6%, and in the city I live there's an additional 1% local option. If something $10 is taxed, I'll need $10.07 to buy it. Really not that hard. It seems to only be non-Americans that can't understand this, but if you live in the system and deal with it daily, its not a big deal at all; no guessing at all. – Andy Dec 6 '16 at 23:05
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    @Andy: it's actually $10.70. – RemcoGerlich Dec 7 '16 at 8:23
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    @RemcoGerlich I assume you'll forgive my typo on the price. At any rate, people that need to budget don't even typically have to worry about it, as grocery food, clothing and other necessities aren't typically even subject to sales taxes at all. Utility bills will always include taxes in the final amount, gas taxes are always built into the price like a VAT, etc. I think something like a heating bill would be more of an issue to a budget, given it will vary based on the temperatures that month. – Andy Dec 7 '16 at 23:28
3

First of all, there's hardly anywhere in the United States with a sales tax over 10% much less a rate of over 50%; you either misunderstood the price of your apples or were overcharged.

Retail sales tax in the US and Canada is inherently different than VAT (value added tax) charged many other places, sales tax is charged based on what the retail sale of a product vs. VAT accumulating through each stage of the production process.

While now easily surmountable, before computerization various local (city and county) sales taxes across the country posed a burden to retailers who operate in multiple places to calculate prices. Another reason for tax being is giving transparency as to how much tax governments are collecting.

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    VAT and before tax prices are mentioned on receipts everywhere in the EU. I am also not sure I understand what you mean with “accumulating through each stage of the production process” or how this would have any impact on prices posted in shops. – Relaxed Oct 3 '14 at 22:46
  • The VAT-break-down is listed on receipts many places, but customers don't always get receipts. – Carl Oct 3 '14 at 23:07
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    Canadian HST is the same as VAT, but is not usually included in the ticketed price. Some ethnicities (Korean fast food retaurants for example) prefer to roll the HST into the price so you may pay what you see, or maybe not. – Spehro Pefhany Apr 30 '15 at 18:07
-1

In most if not all states, the sales tax is levied on the total value* of the purchase, not on the individual items. For example, RCW 82.08.020:

(1) There is levied and collected a tax equal to six and five-tenths percent of the selling price on each retail sale in this state

Consider a purchase of a dozen $1 widgets with a sales tax of 8.6%: if the tax was per-item rather than per-purchase, you'd be paying $0.09 tax per item ($0.086, rounded to the nearest cent), for a total of $1.08. Computing the tax on the purchase instead gives you $12 * 0.086 = $1.03 in tax.

* Total taxable value. Food, for example, is frequently not subject to sales tax, so if you purchased bread, eggs, milk, napkins, and paper towels, the tax would only be computed for the total price of the napkins and paper towels.

  • Ten items at $0.10: $0.0086 rounded up to a penny tax on each for $0.10 tax vs. $0.086 rounded up to $0.09 on the purchase. Twenty items at $0.05: $0.0043 rounded down to $0.00 (per RCW 82.08.054) for no sales tax vs. $0.086 rounded up to $0.09 on the purchase. There's almost always a difference in rounding between per-item and per-invoice computations. – Mark Oct 4 '16 at 0:18
  • Okay cool; wasn’t sure and was too lazy to do the maths. By the way note that in Europe this doesn’t matter; the tax is levied from the salesperson by adding up all their sales of a specific tax rate at the end of a set period. The prices are simply quoted as prices including an imaginative (non-rounded) percentage of VAT. – Jan Oct 4 '16 at 0:21
  • Actually, re-reading your answer I misinterpreted it the first time. I thought you were assuming twelve items totalling in a dollar, but you had been assuming twelve items at a dollar each. So the first comment is moot anyway ;) Sorry for any confusion ^^ – Jan Oct 4 '16 at 0:22
  • In areas where multiple tax rates exist for different classes of items, you may still see a per-item tax calculated. I was surprised to see so many types of taxes from a receipt from a recent trip to a grocery store in Chicago. And if I remember correctly, the rounding is done by each store's policy, as the sales tax is actually levied on retailers and not consumers. Stores just pass it on down in whatever manner they see fit (total then round is least likely to cause arguments from their customers) – Kent Dec 5 '16 at 5:27
-3

No-one has actually answered the question which is why don't American (and Canadian) stores show the true price on stock, i.e. the price that the buyer will pay including taxes, except to say that they don't have to, so they don't, or the more unbelievable response, taxes differ between states, counties and even cities so individual pricing is impossible.

Rubbish. Surely stock doesn't have the price pre-printed on it, that would be silly given that every place seems to have a different end price. Don't Americans have the technology of label guns which print the price (the full price) on a sticky label which is stuck on the product? Or shelf labels showing that full price? (Facetious question - of course they do - so why can't they use it?)

As for competition, if every store had to show the full price, then any competitive advantage would remain, shop A would still be cheaper than shop B by the same x%.

The fact remains that non Americans cannot understand why a simple procedure is so difficult. And the question remains, why aren't American shops honest about their prices?

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    They are honest about the prices. Nobody is trying to claim that you won't have to pay tax. – phoog Dec 17 '15 at 21:46
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    It is just forever calculating in the shop how much the final price will be. In Europe (and most of the rest of the world) you see the price you have to part with, including tax. Much easier on the person shopping. – Willeke Dec 17 '15 at 21:48
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    Sounds like a rant more than an answer. – Karlson Dec 17 '15 at 22:02
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    How about catalogs? And TV advertising? Newspaper advertising? The in-store problem is relatively easy to solve, the rest are not. – Doc Dec 17 '15 at 23:55
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    @Willeke the US has no national sales tax. In jurisdictions like New York City where both the state and the city impose tax, this works out as a net sales tax rate rather than multiple tax amounts. I know that sales tax in NYC is 8.875% or thereabouts. I have no idea what the state sales tax rate is, however. – phoog Jun 19 '16 at 20:32

protected by Community Jun 27 '17 at 9:20

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