What type of tax is applied to the sale of goods and services?

Sales tax is a specific type of tax levied on the sale of goods and services. It is typically calculated as a percentage of the sale price and is collected by the retailer at the point of sale. The purpose of sales tax is to generate revenue for state and local governments, which can then be used to fund public services and infrastructure.

Unlike income tax, which is based on earnings and profit from work or investments, or capital gains tax, which specifically targets the profit made from selling assets or investments, sales tax applies universally to most consumer transactions involving goods and services. Estate tax, on the other hand, is imposed on the transfer of an individual's net worth at the time of their death, thus it also does not apply to everyday sales transactions.

Understanding the different tax types is crucial for both consumers and businesses, as they affect purchasing decisions, pricing strategies, and overall economic behavior.