Question

The following events result in a tax. Which is an example of an indirect tax?

a-Jimmy buys his fiancé an engagement ring at a local jewelry store.
b- Sara inherits her grandfather's home and property upon his death.
c-Mr. Smith's hardware store earned its biggest profit this year to date.
d- Mrs. Jones saves each year for the property taxes owed on her horse farm.

I think it's D but I'm not sure.

Answer 1

A) Because the jewelry store takes inherits the responsibility to ultimately pay the tax with Jimmy’s money. D) is wrong because Mrs, Jones pays the tax directly with intermediary.

Answer 2

A) Jimmy buys his fiancé an engagement ring at a local jewelry store.

Step-by-step explanation:

Let´s start defining what is an indirect tax, the special ¨feature¨ of these is that can be passed from a determined entity to another one, or to an individual.

There are different kinds of Indirect taxes, like, Excise, Customs, even gas and sales taxes, these last ones, are charged practically in all the purchase transactions involving differents goods like clothing, household items, technology, gas, etc.

When Jimmy goes to the jewelry store for the ring, once he makes the purchase, without noticing it in first place, he will pay sales taxes based on the accessory full price, and the state sales tax rate, the final price of the ring, is the one being shown in the counter, it already has this indirect tax included.

However if for any reason Jimmy is interested in seeing information about the indirect tax fee, he can check the transaction recipe, there will see explained information about the price of the item before the sales taxes, and after them.