How It Works

Everything for sale in the US will be itemized by the federal government. These items will be in one of three tax rates. The tax rates are Essential at 0%, Standard at 30%, and Luxury at 45%. Keep in mind, this is not income, but the tax rate are applied to the item sold. This applies to sales, and not rentals.

Essential items will include nutritional food, clothing, and basic shelter. Standard items will include food of no nutritional value, fancy clothing, and most home sales. Luxury will include restaurants, luxury clothing, and luxury home sales. Obviously, there is more things for sale, but these comparisons should give an idea of what applies where.

One-third of the tax will go to the federal government. One-third will go to the state of sale, and one-third will go to the state of establishment. The first third is obvious. The state of sale is where the item was purchased at. In the case of online sales, this would be where the person lives and will have the sale shipped to. The state of establishment is where the business is headquartered. In most mom & pa shops, this will be the physical location where the person walks in and buys the item. In the case such as major chains such as Walmart, the state of establishment will be Arkansas. This could lead to states encouraging large companies to headquarter in their state to get more sales tax. If there is no state of establishment, then the third will go to the federal government meaning the federal government gets two-thirds of the sales tax.