What is the Difference between Self Employment, Sales, Capital Gains, Income, Payroll, Withholding and Corporate Tax
Earning money is the need of every person to spend his life in reasonable way. There are several ways of earning money. Some people do job to make money, while some run their own businesses to earn money. Self Employment, Sales, Capital Gains, Income, Payroll, Withholding and Corporate Tax are the various terms used in this regard. Here is the difference between these economic terms.
Self Employment Tax
Self Employment Tax is tax that is applied on combined contribution of employee and employer that is usually set at 15.30% in United States, but varies country to country. However, 12.4% of this tax goes for social security and 2.4% for Medicare.
Sales Tax
Sales Tax applies on consumer goods with a percentage of taxable prices of goods. It is set by government and paid by consumers. The percentage of sales tax varies according to nature of goods, its production within the country or outside country as well as financial condition of concerned country.
Capital Gains Tax
Capital Gains Tax also called GGT is employed on the Capital gains like prize bonds, property, stocks and precious metal owned by individuals in a state or country. The percentage of GGT also varies country-to-country.
Income Tax
Income Tax is the most common form of tax applied by government on its individuals and business companies in accordance to their income. There are three types of Income Tax; Proportional, Progressive and Regressive.
Payroll Tax
Payroll tax is the form of tax that is applied on employer by government on behalf of its income and salaries that it pays to its employees. The employer withholds and pays off this tax.
Withholding Tax
A part of a person’s income that he send to the federal or local authorities as a payment of his liability of tax for a particular year, is called as withholding tax.
Corporate Tax
Some countries impose corporate tax on income or capital. It is also called as income tax. When a person’s income exceeds from a particular limit, he usually has to pay this tax.
Self Employment vs Sales vs Capital Gains vs Income vs Payroll vs Withholding vs Corporate Tax
Self Employment tax is applied on saving of employee in the form of deduction from its salary as well as contribution of employer for the set percentage of social security and Medicare. However, sales tax is applied by government on all consumer goods for generating revenue for state in contrast to income tax that is applied for same purpose but on the annual income of every individual of state. Capital Gains tax is least common form of tax that is applied on bonds, real estate, precious metals etc. However, Payroll is the tax that is paid by employers on behalf of salaries that it pays to its employees. Withholding tax is the tax which a person pays to tax authorities for a particular year. Corporate tax or income tax is the tax, which one pays, when his income exceeds a particular level.
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