Question

Which statements best describe sales tax? Check all that apply.

Sales tax does not affect low-income groups.
Sales tax is an indirect tax levied on goods and certain services.
Sales tax is a type of regressive taxation.
Sales tax is a direct tax paid by consumers to the government.
Sales tax affects high-income groups.

Answer 1

Correct:
- Sales tax is an indirect tax levied on goods and certain services.
- Sales tax is a type of regressive taxation.

Incorrect:
- Sales tax does affect low-income groups (it often weighs more heavily on them as a share of income).
- Sales tax is not a direct tax; it is collected indirectly (usually by sellers) and remitted to the government.
- While sales tax does apply to high-income groups too, the statement as given is not a distinctive description — the key point is it applies to all consumers but is regressive in effect.