Indirect Tax

Direct taxes: the government looks at a person or a company and says, “time to pay up, man!”

Indirect taxes are, well...less direct.

Indirect taxes are taxes that aren’t collected directly by a government agency, but first through someone else, like a retailer who collects sales tax. Sales taxes and import duties are both types of indirect tax, as they get passed to consumers via third party sellers.

Since indirect taxes are taxes placed on goods and services, and everyone pays the same dollar amount, indirect taxes disproportionately affect lower-income people. Conversely, direct income taxes in governments with progressive taxation affect people more proportionately.