After working in retail throughout my teen years, I knew it was against the law in the UK to sell anything for a higher price than what the price tag says. While I'm not sure if that's the case in the USA, it did set off alarm bells. Without being properly educated, and for the sake of a couple of dollars, I just paid the nice cast member and thought I'd investigate later without seeming like a completely clueless tourist. I look at my receipt and the t-shirt was listed at $19.99, but there was sales tax listed of $1.20.
About Sales Tax In The USA
Sales tax in the USA - which is essentially VAT - is added on top of whatever the price of the merchandise you’re buying when you go to check out. Unlike here in the UK where VAT is included in the price of most retail items (unless otherwise stated), it is not included in the USA.
My question has always been why isn’t sales tax included in the price? Turns out, there's no definitive answer; there are several reasons why it's the way it is, and it will unlikely ever change.
Sales Tax Rates Across States
In the UK, our VAT rate is set by the HM Revenue and Customs of the UK government, and whatever the VAT rate is set to is the rate for the entire country. In the USA, sales taxes can (and do) vary from state to state. The states can control their own sales tax, which they can change depending on whether they want to draw business to their state or to generate revenue from the spending to fund government projects.
Fun fact: There are a couple of states that has a 0% sales tax, and it's a common strategy of the people in the nearby states to travel to that state to make big ticket item purchases (like for example, at Apple) to save money.
It is somewhat of a hassle for businesses to have different prices in one state compared to another state where they operate, depending on the sales tax. If they did this, it would increase the costs to manage, which ultimately would lead to higher costs for their customers. Instead, whatever the sales tax currently is just gets added onto the purchase at the till.
Sales Tax Is A Consumer Only Tax
Sales tax is a lot less complicated than VAT, because VAT is charged each time a product changes hands. For example, when the manufactor sells items to the distribution companies, and then to the shops themselves, etc. Sales tax is only charged at the last step - when the consumer buys it.
Physiological Trickery
You likely know the common retail tactic of pricing a £20 item for £19.99 to make it look cheaper - the same applies here. A retailer can sell a bottle of coke for $1.99 and it looks cheaper than $2.15. Even though the sales tax gets added on when you buy something, it doesn't appear that way when you first look at the price of an item.
"It's The Way it Is"
Adding sales tax at the till is how it's always been and Americans are just used to it, it's only odd to us tourists where things work a bit different.
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Walt Disney World Sales Tax
Walt Disney World property actually spans over two counties. Most of the Walt Disney World Resort is in Orange County, which has a sales tax rate of around 6.5%, while the most southern Resort hotels are in Osceola County, which has around 7.0% tax rate. So you could end up paying a slightly different price for the same item in different parts of the resort, something you may not have noticed.
Just remember, unless something is listed as "sales tax included" (which some beverage stands at the parks are), assume the cost of what you’re buying is around 6-7% more than the listed price.
