Legal Definitions - consumption tax

A consumption tax is a type of tax that is imposed on goods and services that are consumed by individuals or businesses. It is a tax on spending rather than on income or profits.

For example, when you buy a new pair of shoes, you pay a consumption tax on the price of the shoes. The tax is included in the price you pay at the store. Similarly, when a business buys raw materials to make a product, they pay a consumption tax on the cost of the materials.

Consumption taxes can take different forms, such as sales tax, value-added tax (VAT), or goods and services tax (GST). These taxes are usually collected by the government and used to fund public services and programs.

One advantage of a consumption tax is that it can encourage people to save money instead of spending it. This can be good for the economy in the long run, as it can lead to more investment and growth.