Sales tax is an indirect tax, which means that it is not collected directly by the state like income tax, housing tax or property tax. Sales tax is in fact a tax which is added to the price of all the products which are subject to it that is to say almost all. Only a few are exempt, such as the sale of fiscal or postage stamps. This is the reason why two amounts always appear on invoices for products and services: the price excluding tax (HT), which corresponds to the seller’s remuneration, and the price including all taxes (TTC), which includes the amount of Sales tax. It is therefore the seller of the product or service who collects the Sales tax from his customers and who is then responsible for paying it back to the State. For proper calculation of the Taxfyle.com/sales-tax-calculator this is important.
The Prevention factor
To prevent the same product from being taxed several times during successive purchase and resale operations, such as between a wholesaler and a retailer, a system of deductions for Sales tax paid by businesses is put in place. It thus allows companies to deduct from the sums to be returned to the State the amount of Sales tax they have paid on their purchases.
- The value added tax (Sales tax), created in 1954, and is a French invention that is applied today in nearly thirty countries, mainly in Europe. It is a proportional indirect tax, calculated on the sales price excluding tax of all goods and services. Exports are exempt from French Sales tax but are subject to the Sales tax of the country of destination. Banking, medical activities or the associative sector are exempt from Sales tax but are subject to a specific tax on salaries.
- Sales tax is an indirect tax borne by consumers but paid to the State by businesses, after deduction of the Sales tax they have previously paid when purchasing the product or raw materials necessary for their production. This Sales tax split payment mechanism is advantageous in more than one way:
The tax is economically neutral, without distortion of competition, since ultimately only the final consumer bears the cost thus; in particular, the length of the production chain has no impact on the weight of the tax in the final price.
The public treasury does not need to wait for the sale of the final product or the consumption of the service to collect the money the tax is paid as the production / distribution chain progresses.
Sales tax is often considered an unfair tax, because it is borne in the same way by all consumers, regardless of their income (however, the share of income consumed is greater for the most modest households).
Its yield is important: the Sales tax is the first French tax in terms of yield. According to the finance law for 2019, its gross revenue collected is € 186 billion (or 44.9% of the € 414.6 billion in gross tax revenue forecast for 2019). Its net income is € 130.3 billion, or 46.7% of the State’s net tax revenue.
In mainland The country, the standard rate of Sales tax, applied to the majority of goods and services, has been 20% since January 1, 2014.
However, there are two reduced rates:
on January 1, 2012, a reduced rate of 7% was created which rose to 10% on January 1, 2014: it concerns most of the products previously taxed at 5.5%, including transport, hotel accommodation, furnished rental or classified camping, renovation and maintenance work on housing, catering, non-refundable medicines, entrance fees to cinemas, funfairs, museums, cultural sites, exhibitions, etc.
To 5.5% for goods and services considered basic necessities, including some food items, services and facilities for people with disabilities or dependent elderly, school canteens, electricity and gas subscriptions. This reduced rate has been reinstated since January 1, 2013 for books and ticketing for live shows. There is also a special rate of 2.1%, particularly on reimbursed drugs and the press.