Indirect Tax

An indirect tax is a tax imposed by the government that may be paid indirectly by shifting the cost (see Tax Shift) to another individual or entity in an effort to offset the cost.

Example:

The sales tax is an indirect tax as it is a tax on goods and services that businesses must pay to the government that can be passed on to the consumer in an effort to minimize the loss of profits. If the sales tax increases, a business may increase their prices to pass or shift the burden of the tax increase to the consumer in an attempt not to lose money.