Understanding 'Plus Tax' in Pricing: Location-Based Pricing Clarified
The term 'plus tax' is often used in pricing, especially when items vary in tax applicability based on location. This article aims to explain how 'plus tax' works and the impact of location on the pricing of goods, such as Hershey's King Size bars, in different states and districts.
What is 'Plus Tax'?
When an advertisement or product description includes the phrase 'plus tax', it means that the price stated is the item's base cost, and additional local taxes will be applied at the checkout stage. The amount of tax you end up paying can significantly vary depending on your geographical location.
The Example of Hershey's King Size Bars
Consider an advertisement from Hershey stating that their King Size bars are priced at '2 plus tax.' This pricing model leaves customers uncertain about the final cost until they check out. Here’s how the pricing can vary:
1. Pennsylvania, U.S.
In Pennsylvania, candy is non-taxable. Therefore, the listed price '2 plus tax' results in a final price of $2 for the Hershey King Size bar. This scenario demonstrates how the local tax rate can render the stated 'plus tax' amount as zero.
2. Florida, U.S.
In Florida, the sales tax rate is 7%. Applying this state sales tax to the base price of $2 would result in an additional tax of $0.14, making the final price $2.14. However, some districts may have additional local sales taxes applied on top of the state rate, increasing the final price to $2.19.
3. District Variations
Note that within the same state, particularly Florida, the final price can further vary based on the district in which the sale is made. Some districts may have an additional 1.5% local sales tax, leading to the final price being $2.19, as an example.
The Role of Location in Pricing
The price of the actual item, prior to tax, is typically what you see marked on the product or advertisement. However, when you checkout, taxes are added to this base price, which can range from 6% to 10%, depending on the state or district you are in.
Why Does this Matter?
Understanding 'plus tax' pricing is crucial for consumers. It provides transparency and helps in making informed purchasing decisions. Customers can anticipate what they will pay at the checkout, allowing them to plan their budgets more effectively.
Conclusion
The concept of 'plus tax' is a practical way for businesses to advertise their products with flexibility across different tax jurisdictions. It ensures consumers understand the additional costs they will incur based on their location.