Tariffs Explained – Here’s Who Pays
Here’s Who Actually Pays, IRS Tax Attorney (Naperville IL)
At Tax Law Offices, we often discuss taxes that impact business owners and individuals, like income, employment, and sales tax. But there’s one important tax type we haven’t discussed much: tariffs.
You’ve probably heard about tariffs on the news. They’re often described as taxes on foreign countries and their goods. But here’s the truth: tariffs are not a tax on other countries. Instead, tariffs are sales taxes paid by people in the United States, both businesses and consumers alike. The idea is to make other countries’ products more expensive (and therefore less desirable), so that we spend our money on 100% American-made products instead.
Let’s break it down:
When a U.S.-based company buys goods from another country, whether they’re a manufacturer or retailer, they’re charged a tariff. That cost isn’t paid by the country exporting the goods. It’s paid right here at home, by the person or business making the purchase.
And what happens next? The tariff cost is passed down the line. Manufacturers pass it to retailers. Retailers pass it to customers. In the end, U.S. consumers often end up paying more, not the foreign companies.
There’s a common misconception that tariffs help balance trade deficits by “charging” other countries. But that’s simply not how tariffs work. They don’t punish foreign countries. They tax U.S. buyers.
So, the next time you hear about a tariff, remember: It’s not about making some other country pay more. The only point is to make that country’s products more expensive, and therefore less desirable. But that “more expensive” part … WE pay that bill in tariffs.
FAQ: U.S. Tariffs on Small Business
1. How do tariffs affect the price of vehicles for my business?
Tariffs can significantly raise the cost of imported vehicles. If your business relies on foreign-made trucks, vans, or commercial cars, you may notice higher sticker prices. Manufacturers often pass the cost of tariffs directly to consumers and businesses. This can affect purchase decisions and leasing rates.
2. Will tariffs make produce like avocados harder to find or more expensive?
Yes, potentially both. If tariffs are applied to countries exporting produce to the U.S. (such as Mexico), prices for fruits and vegetables can rise. Supply can also be affected if fewer shipments are made due to increased costs. For food service or grocery businesses, this could mean more expensive or less reliable access to popular items.
3. What about truck parts and tires—do tariffs affect them too?
Absolutely. Many truck parts, including tires, brakes, and electronic systems, are imported. If these parts are subject to tariffs, expect higher prices and potential delays in restocking. This can increase operating costs and downtime for trucking, logistics, and delivery-based businesses.
4. Do tariffs affect the cost and availability of computers or cell phones?
Yes. Many components for phones, laptops, tablets, and networking equipment are imported from Asia. The same goes for video gaming gear. Tariffs on these products—or the raw materials used to build them—can lead to price hikes or product shortages. This affects small businesses that depend on technology for daily operations, online sales, or customer service. Holiday shopping probably should be planned early.
5. Do I need to pay or report tariffs like I pay sales tax (Ex: In Illinois, on Form ST-1)?
No. Tariffs are import taxes collected by U.S. Customs at the time goods enter the country. They’re not filed or paid like sales tax on Form ST-1. Importers (or their customs brokers) handle tariff payments, usually before the goods are released into the U.S. market.