Thursday, November 21, 2019

What does it mean to be tax exempted?

A week ago my daughter was asking me about a topic regarding tax, this was assigned to her to discuss in the classroom. For a teenager, the word tax can go as simple as the additional payment on top of the basic amount of the things she purchases.

In an in-depth meaning of the word tax:

"Tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC"

Aside from personal payments such as buying goods (food, medicine and, supplies), companies and sellers of goods are compelled to pay their taxes, declaring the capacity and the generated income of the business, this will be the basis of how the tax will be computed. An ordinary consumer and the business consumer. 

What is sales tax- "Sales tax is sometimes described as a "consumption tax" and is levied on goods and services purchased from businesses. Not all states require the payment of sales taxes, and those that do set different tax rates for specific categories of products." 

In addition to tax payment, a certain business or entity can be exempted from paying tax, this is called sales tax exemption. This varies from country, state, and location. A good example case is the Wayfair sales tax exemption, in this article, a guide is given to answer questions about "enforcement of South Dakota V. Wayfair, that is collecting and remitting sales tax to states."

  • Tax exemption is the monetary exemption of persons, people, property, income, or transactions from taxes that would otherwise be levied on them. 
  • Tax exemption generally refers to a statutory exception to a general rule rather than the mere absence of taxation in particular circumstances, otherwise known as an exclusion. Tax exemption also refers to removal from taxation of a particular item rather than a deduction.
  • International duty-free shopping may be termed "tax-free shopping". In tax-free shopping, the goods are permanently taken outside the jurisdiction, thus paying taxes is not necessary. Tax-free shopping is also found in ships, airplanes and other vessels traveling between countries (or tax areas). Tax-free shopping is usually available in dedicated duty-free shops.- Wikipedia- Tax exemption

Tax can go broad to understand and apply, every information will depend on the status of the taxpayer. A taxpayer can also consult professionals such as a bookkeeper and an accountant, who can handle and manage your financials. You don't want the government seized you for illegal non-payment or underpayment of tax called tax evasion. This is a criminal act that can land you to jail for five years or so depending on the amount being evaded. 

There are accounted personalities with tax evasion cases and some have been brought to public awareness. That is why this is considered a serious case not to look out for.

My daughter had the basic grasps of the topic she discussed. She told me that she tried to go as simple and easy to understand words and even translated some to a layman's terms, she also made a simple box and arrow illustration that she presented to the class. Some questions were asked to clarify some areas and the teacher did assist her with some answers. I am convinced that at these early age kids at school need to learn this topic, this will give them a better understanding of how buildings, infrastructure and, housing and medical condition underprivileged people are sustained.

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