Why are prices published without tax in the US?

  • 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?

    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.

    This isn't specific to San Francisco. This is basically the way prices work everywhere in the USA.

    @FakeName And in Canada as well, where the VAT percentage is different per province

    In Canada, I think tradition/influence from the US plays a role as well. Having a price per province does not seem like a big deal and taxes could easily be included. Eurozone countries are sometimes smaller than a Canadian province, have different VAT rates and yet taxes are always included in prices. Also, some products have just one retail price in several countries, which means the retailers actually set different before-tax prices so that the apparent price is the same and “absorb” the difference. All this is perfectly doable if the law made it mandatory.

    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.

    In Switzerland, the price is always on the product itself (either printed or with a sticker), even for fast-moving consumer goods in supermarkets.

    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.

    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.

    I saw this question a while ago when it was first posted, but only just today realized that this might make a great question on law.se

    Jaayysus, here in Australia publishes and printed prices always include all taxes and are what the customer pays. I find it so backwards and plain misleading for the US to advertise prices that are often far off what you get on the bill. There is ZERO advantage to this.

  • Relaxed

    Relaxed Correct answer

    7 years ago

    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).

    Ah, comparing apples and guns :)

    Great answer, if you could add info on how to calculate the tax to be expected for SF I Will except this answer.

    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. http://www.boe.ca.gov/cgi-bin/rates.cgi?LETTER=S&;LIST=CITY

    *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 That's not so simple, clothes often have labels with prices for all shops, supermarkets advertise specific prices in ads, leaflets, on the radio, etc. All this would still be extremely complicated in the US, even with computers.

    One thing not noted here. As an American, I _want_ to see prices _without_ tax, for the simple reason that when I do get the bill I can get annoyed that the taxes are too high and be motivated to complain about it to my representatives.

    @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.

    @Annoyed And I always thought the reason prices were printed inclusive of VAT in Europe was that the VAT was too high!

    Aren't taxes always to high, no matter the percentage ;)

    @Annoyed I suppose the difference is that in the US, products have prices printed on them. That's not the case in Europe — instead, stickers are printed and attached to the products. And are taxes really the *only* reason prices differ? Isn't the base prices already higher for supermarkets in expensive locations, or in locations with higher minimum wages, or in very remote locations? Or are base prices uniform? That seems very... socialist?

    My own currency is Euro as most of you and to make abstraction of taxes in US/Canada, I just read the tags as if they are in euro. This is very approximate, but if you consider the exchange rate being between 1.25 and 1.33 and the tax rate being 10 to 15% (so 1.1 to 1.15), you have a very rough comparison but very easy to calculate (easier than tagged price*1.1/1.3 +- 10% depending on non-displayed factors - I know food is very little taxed for example).

    @gerrit Again, it's not true for *all* of Europe, see my other comment on Switzerland. Regarding prices, there are many techniques to practice price discrimination. I don't know if big distributors set different prices under the same brand in different locales but the problem in the US is that we are talking about different taxes in the same market/metro area, not remote resorts or different states.

    @gerrit I have seen prices differ at two different grocery stores of the same chain _in the same city_ separated by two kilometers or so. The difference was that the store in the lower-income neighborhood had higher prices for many items. Both stores have since closed, run out of town by a competitor who opened several stores with cheaper prices across the board. And we have no general sales tax.

    You can cross a municipal boundary within a US state and pay tax at a different rate at another store in the same chain. Usually it isn't **much** different (something like 0.25%) but it may be noticeable if you're buying something big.

    Some places in the US *do* traditionally include sales tax in sticker prices; for instance, at a ballpark prices normally include all tax. Generally when they do this there's a sign, and often it's in situations where you aren't likely to go to a competitor with a lower sticker price.

    Umm so all stores print their labels in ONE place and ship around the US? If they are printed at the store then the store knows the final price. Print that. Problem solved -.-

    @MaciejSwic Or introduce a federal VAT or… only it's never as simple as that so what's the point?

    Concession stands at stadiums and similar places often include the tax on the sign so they can have round final prices and avoid making change (or make change with only quarters).

    @ZachLipton and some stores -- mostly I've seen this in restaurants -- now have cash registers that will include a "rounding" item on the receipt for the same reason.

    It should also be noted that online stores also maintain the practice of not showing you the final price before you checkout, even if you're logged in and they have your shipping address on file. Unlike physical stores they can easily pre-compute everything in advance, but they still prefer to cheat you a little bit.

    This answer doesn't make any sense.

    @RoboRobok Is it entirely devoid of meaning, obviously absurd or merely incorrect?

    The part about being unable to print labels is absurd. USA is obvious case of anti-consumer country on many fields, there is no other reasoning. In Europe you always see the price as it is, even though European countries are of the size of American states.

    @RoboRobok What I explained is that tax rates are not unified at the state level but can also vary at the county and city level. But I don't disagree that there is also a good dose of business lobbying in favor of the status quo, I also wrote that in the answer.

    Even if the tax was limited to one particular store, it still doesn't justify the lack of tax info.

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Content dated before 7/24/2021 11:53 AM