Where is this being practiced? I've been to pretty much every country in Europe in the last 20 years and in a conventional shop the tax (VAT) is always included in the price.
In the planet money podcast, they were talking about how Colorado's new marijuana tax policy should have been implemented, whether the tax should be paid by the grower (which would result in the tax being included in the price) or by the consumer (which would result in the tax being added at the register, which is common for sales taxes in the US).
Their conclusion was that if governments wanted to limit consumption, they should choose a policy such that the cost was included in the sticker price, but if they wanted to maximize tax revenue, then they should collect the tax at the register.
The way I understand how VAT taxes work, it would seem that this would be friendlier to consumers, to the detriment, perhaps, of overall consumer spending.
The way it works in Australia (I think, certainly not 100% sure) is through tax credits. The miller buys wheat from a farmer, and pays tax because it's a sale. But the miller gets tax credits for later selling that wheat to a baker (in the form of flour). The baker pays tax on the flour, but puts tax on the bread. At each stage value is added to the object, and due to the credits, the differential of that value has the appropriate tax.
So if you have a wholesale/retail business, you have an easier time of it - everything gets taxed at the same level, and your clients that onsell can claim their own tax credits. It is the final purchaser of the product that ends up actually forking out for the tax.
It's extremely common in the US. Each state, county, city, different "special districts" can impose their own sales tax. For things like national chains it would be impossible to advertise prices, as one store may be under 10% sales tax and a mile away one is under 15%.
They collect sales tax. If you buy from a small retailer out-of-state, you;'re supposed to declare the purchase on your state tax return and pay 'use tax' (ie the sales tax you would have paid if you'd bought it locally).
It's far less confusing in practice. I mean if Americans are as dumb as Europeans assume us to be then surely it would be chaos over here if it were really as complicated as it's made to sound in Europe.
It's common in USA, because there are different sales taxes in different states. So advertised products are advertised without tax included in the price.
I'd almost go so far as to say it's almost universal in the US. The main exceptions:
Gasoline (petrol) is always priced with all taxes included.
If the establishment is small enough that they're not using a register for cash transactions, they won't add tax. For instance if you buy a hot dog from a food cart for $4, that will be the whole price.
But for just about anything bought inside an actual store, tax will be added on.
It goes further than that; a county or even a town can have a separate sales tax. You can have 9% in one county, 10% in a city inside the county, or 8% the next county over.
And even beyond that, some governments levy different taxes on different items (e.g., lower tax on groceries), while other nearby governments may levy the same tax on everything.
Further, some governments charge tax on the pre-coupon/pre-discounted price, while others tax only the actual final price.
Further still, some entities like public schools are exempt from paying sales taxes in many states/municipalities. In this case, the price sign would have to show both a pre-tax and tax-included price on it, which may be the best solution anyway.
Regardless, these differences are probably easiest to account for at the point of sale.
A tangential, but this complexity is one reason I think that sales tax should largely be abolished in favor of rolling it into income taxes. The only context it makes much sense in is taxing various luxuries. Beyond that, it's confusing, adds administrative overhead, and discriminates towards those with lower incomes.
Why are the price tags universal across all stores and all states, and centrally produced? Or if they aren't, surely each shop can print out their own price tags and add the appropriate tax then.
Price tags are one thing. The region-wide ads for Kroger saying "milk is on sale for $1.99/gal this week with your Kroger Card" are another. A broadcast TV ad like that might be visible in 10 or more different sales tax areas. Having worked in retail, I have several anecdotes from customers getting annoyed over even the smallest pricing discrepancies. I had one shopper complain about being charged less than the price in the mailed circular on the theory that the chosen product was of lesser quality than the advertised product.
