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Simple English definitions for legal terms
bracket system
Read a random definition: net premium
A quick definition of bracket system:
A bracket system is a way of collecting sales tax based on the price of an item. It helps to avoid collecting a tax less than one cent and allows the seller to easily determine the amount of tax to be collected. This system can be set up by law or regulation.
A more thorough explanation:
A bracket system is a method used in tax law to collect sales tax based on a graduated payment system. This means that the amount of tax collected depends on the purchase price of the item being sold. The purpose of this system is to:
- Avoid collecting a tax less than one cent
- Avoid the state having to calculate the exact amount of tax on each sale
- Allow the seller to easily determine the amount of tax to be collected
- Ensure that the state collects the appropriate amount of tax
For example, let's say a state has a sales tax rate of 6%. Under a bracket system, if someone purchases an item for $10, they may only have to pay 60 cents in sales tax. However, if someone purchases an item for $100, they may have to pay $6 in sales tax.
The bracket system is often used to simplify the tax collection process and ensure that the appropriate amount of tax is collected without burdening the seller or the state with excessive calculations.