Purpose

• Taxes support the economy. Education, medical coverage and city infrastructures, for example, benefit from tax payments. For instance, in the United States, taxes fund the Social Security system. The current workforce pays taxes through payroll deductions. The deductions support Social Security payments for the elderly and disabled of moderate means. Taxes on purchases, or sales taxes, are exercised at the final point of sale and fund federal and state programs.
  
  

Types and Amounts

• Several types of taxes, such as sales and use taxes, exist. Use taxes are assessed in a consumer's home state when purchases are made in another locale. For example, the purchase of a vehicle in New York for shipment to Florida would require a use tax payment at the destination city. Many states do not impose taxes on utilities or food because the increased cost affects low-income households. The amount of the tax depends on the location. Each state imposes a sales tax percentage, which businesses apply to the total purchase price. California had the highest tax percentage, at 9.75 percent in some cities, as of June 2011.
  
  

Collection

• Businesses that purchase goods for resell, such as computer service businesses, must obtain a "resale" certificate, which excludes the tax on the initial purchase made by the business. The tax is then passed on to the consumer. Consumer purchases include the tax as a percentage of the sale. For example, a state tax of 6 percent on a $100 purchase results in a $6 tax. Businesses must request a "sales and use," or an equivalent, license. Typically, a state's business services division issues the license and establishes a tax account for the business. Once the consumer pays the $106, the merchant keeps the tax amount for distribution to the tax account.
  
  

Distribution

• Merchants must pay taxes into their state tax accounts on a regular basis. Typically, merchants submit the collected payments on a quarterly basis. The state then applies the taxes to programs, such as road construction, public utilities and public services.