Income Tax vs. Sales Tax
Key Differences
What is Income Tax?
An income tax is a government tax that is imposed on liable individuals on their income, profits and other taxable incomes. The rate of tax varies from income to income. Normally the person having higher income charged with higher rate of tax as comparison to the person having low income. It is based on the principle of progressive tax as rate increases with the increase in taxable income and decreases with the decrease in taxable income. Income from salary, income from business, income from capital gains, income from property, income from other sources, etc. all are kinds of income tax. The main feature of income tax is that it is a form of direct tax as the person who is actually paying the tax can’t pass over its impact on other persons.
What is Sales Tax?
A sales tax is a government levy that is payable on the sales of described goods and services. Federal excise duty, customs duties, gross receipts tax, value added tax, general sales tax, fair tax, turnover tax, etc. all are kinds of sales tax. Normally the rate of sales tax remained fixed for each goods and service category separately. Moreover, the rate of sales tax may be differ in case of sales to registered person and non-registered person, however, non-registered persons are charged with higher rate of tax. The main feature of sales tax is that it is a form of indirect tax as the retailers, wholesaler, dealer or manufacturer pays the tax at initial level provisionally and later on, he shifts the burden on the end-customer by including the amount of sales tax in the price of goods or services.
