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Costly Inputs: Unraveling Sales Tax’s Impact on Businesses

By: Katherine Loughead, Kyle Hulehan, Dan Carvajal

Sales taxes go beyond a few extra bucks at the register. It’s not just about what you pay, but who pays. What are the implications of state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. bases across the U.S.?

Katherine Loughead, Senior Policy Analyst & Research Manager at the TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation, joins host Kyle Hulehan. Together, we’ll uncover the core principles behind an efficient sales tax system and examine how taxing business inputs can lead to economic inefficiencies and higher prices for consumers.


  • State Sales Tax Breadth and Reliance, Fiscal Year 2021 See more
  • Kentucky Sales Tax Modernization: Keeping the Sales Tax on Sales, Not Production See more
  • State and Local Sales Tax Rates, 2024 See more
  • Tax PyramidingTax pyramiding occurs when the same final good or service is taxed multiple times along the production process. This yields vastly different effective tax rates depending on the length of the supply chain and disproportionately harms low-margin firms. Gross receipts taxes are a prime example of tax pyramiding in action. See more


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