Local Tax Rates Applied to Indirect and Induced

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    jenny
    Hi Paul, Click [url=http://implan.com/v4/index.php?option=com_docman&task=doc_download&gid=135&Itemid=7]here[/url] for a document describing how the tax impact report is generated. The following are some additional notes that might be helpful: The same sales tax rate applies to total industry sales, regardless of how those sales originated (i.e., final demand vs. intermediate demand). For any sector that collects sales tax, that sales tax is included that sector’s total output. The IBT for the sector includes the sales tax turned over to the state and local government. For the retail sectors, output = gross margin, so the IBT-to-gross margin ratio is likely higher than the sales tax rate since the sales tax rate is applied to gross sales. Gross margin includes sales tax collected. Since the retail sector collects the sales tax it is part of their IBT. The tax impact report estimates are based on the distribution of all IBT collected by all sectors as described by the Census of Government Finances for the region. There is only one IBT column so it represents the average distribution for all local industry. You cannot edit an industry to reflect its specific tax structure but you can modify the direct tax impact report to reflect your local knowledge. It is recommended that you leave the indirect and induced tax impact report numbers as reported by IMPLAN, as they involve a large number of industries and the average for the region would be more appropriate for them. Regarding internet sales - if the purchse is not made from a local vendor, it will not be counted in the impacts. When you go on-line and buy a Dell, you are buying directly from the manufacturer (purchaser price = producer price) and Dell has to collect the sales tax and it becomes part of Dell's IBT. If Dell is not located in your study area, there will be no local impact. Out-of-the area shopping is accounted for in IMPLAN via the RPCs.
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    pharris
    Hi Jenny, thanks sooo much...but I am sooo slow...and didnt frame my questions very well...I wouldnt think that I would apply the tax to the total Indirect column, since some of these have taxes embedded in the total Indirect Ouput...so I wouldnt apply a tax on a tax...but some intermediate goods are not subject to taxation, so applying a tax would seem risky...I woudnt know which industries are purchasing intermediate goods that are exempt from taxes because they are using these Intermediate goods in the production of a final good...is that correct? I wasnt very clear on my Internet sales question...I do fully understand your response...what I meant to state is that I have a concern about how well IMPLAN can account for leakages of sales of consumer items through the Internet. So when employees of spend their salaries from direct and indirect items on consumer items, I am concerned that some of these sales are leaked from the area; I realize that IMPLAN tries to account for these, but my concern would be that represents a difficult task. Does IMPLAN use the Consumer Expenditure Survey to allocate Induced purchases? If so, this survey accounts for out-of-town purchases; I should look to see whether it accounts for Internet leakages, but would greatly appreciate if you already know...thanks so much, Jenny, for your timea and expertise.
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    jenny
    Hi Paul, A few important clarifications: 1. Only sales to final demand are subject to sales tax 2. It the tax rate found by dividing IBT by total industry output does not equal the known tax rate in your study area: a. Recall that IBT includes more than just sales tax. b. For non-retail sectors, not all sales are to final consumers (and thus not subject to sales tax), so the tax rate calculated this way will appear low. c. For retail sectors, output = gross margin (not gross sales) so the tax rate calculated this way will appear high. 3. Regarding the distinction between indirect vs. induced tax impact: these are not estimated by separate processes; rather the total tax impact is calculated and then is simply proportioned out to direct, indirect, and induced based on the proportion of the total output impact that is direct, indirect, and induced. 4. Regarding internet sales, there is an IMPLAN sector for these (sector 331-Nonstore retailers). National household Personal Consumption Expenditures (PCE) are estimated using the BEA Benchmark I-O-to-PCE bridge tables and current NIPA PCE data. National PCE are distributed to states and counties based on the number of households and household income for each of the nine income categories. The spending patterns for each of the nine household income categories were created using the BLS Consumer Expenditure Survey.
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    pharris
    Hi Jenny, thanks again so much...I guess I am still not getting it...and it is my fault...based on "1", I would think that local taxes should not be applied to Indirect and Induced...is that correct? But I did think that Induced does represent new changes to final demand (through purchases from wages from employees). You have been very patient with me, and I greatly appreciate all your time.
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    jenny
    Hi Paul, I'm not clear as to what you mean when you say "Local taxes should not be applied to Indirect and Induced." Are you talking about applying your own local tax rate post-analysis? Are you talking about sales taxes in particular? An example or some further elaboration might help us sort this out. Thank you.
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    pharris
    Hi Jenny, yes...if I enter changes in final demand and then run an output report, I thought Scott (as well as Tom Johnson at the U of Missouri) told me a long time ago that sales taxes (such as the 6.875% State Sales Tax in MN should not be applied to the total Indirect Output, or any categories of Indirect Output, since these represent intermediae transactions some or many of which may not be subject to the sales tax); I have some concerns about applying it fully to the Induced because I believe these are overstated (just a limitation of all I/O models), but at least the Induced is supposed to represent new changes in Final Demand to which these taxes would apply to. I do sincerely and greatly appreciate how much time you have devoted to helping me.
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    pharris
    Hi Jenny, just a clarification and follow up note...I meant to say apply the Gen Sales tax to the appropriate industries (not all but thee ones to which the sales tax would apply...primarily retail industries) under Indirect...the follow up is in case you ask (and it would be very reasonable to do so): "if Scott and Tom have answered this, why are you bothering us again?" well my memory is not the best sometimes...this was covered 15+ yrs ago, and when I run IMPLAN, I do not apply Gen Sales on the Indirect, and I conservatively apply on the Induced (I apply to half the total for each eligible industries as a conservative assumption that some of these sales may not be realized in our City). I may have misuderstood then, and now I am being asked to review a study that I didnt perform...thanks again for all your help.
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    jenny
    Hi Paul, It looks as though you are trying to create your own tax impact report based on your known sales tax rate. We suggest applying your sales tax rate to each of the retail sectors total sales impacts. Regarding not applying the tax rate to indirect: It does not matter who made the retail purchase or how the income for that purchase was generated - if a purchase was made from a retailer, sales tax was collected. Thus, we recommend applying your rate to the total impact (I conferred with Scott on this). One very important thing to remember is that the total output impact for the retail sectors is gross margin, not gross sales. Yet sales taxes apply to gross sales. Thus, before you apply your tax rate, you will need to convert those margins to sales. To do so, divide the total output impact for the retail sector by that retail sector's margin (in decimal form). The margins for the 11 retail sectors are as follows: 0.191 0.481 0.265 0.326 0.294 0.308 0.164 0.479 0.398 0.273 0.438 The margin for each of the retail sectors can also be found in the Setup Activities screen - select the retail sector, put in a dollar value, specify it as gross margin, then go to Event Options>Edit Event Properties>Margins>Edit.
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    pharris
    Hi Jenny, absolutely no rush to respond, but did you receive my replies to your last enail?
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    jenny
    Hi Paul, If you try to respond to one of the automatic e-mails that alert you to a new forum response, the e-mail doesn't get sent to us - the best way for you to reach us is to post in the forum.
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    DougO
    I know businesses do pay sales tax, but I don't know how much, if any, of those taxes get credited back to the company. Major inputs (steel, coal, plastics, parts, etc) are not usually purchased through retail. You are correct that the induced effect contains business to business purchases required to satisfy household purchases. It is possible to estimate the proportion of the business to business purchases contained in the induced as follows: 1) Import an intermediate household spending pattern (eg 50-75) by Activity Options>Import>Institutional spending pattern. 2) Set activity level = $1 million and run the scenario 3) The direct will be household spending (
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