Theme 4: What Is Taxed and WhyLesson 4: Direct and Indirect Taxes

Illustration depicting a flower shop. A house-like building with a large flower hanging over the entrance, flowers in the flower box and a large billboard advertising the flower shop are pictured as part of the illustration.

Taxes can be either direct or indirect. A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be shifted to others. A homeowner pays personal property taxes directly to the government. A family pays its own federal income taxes.

An indirect tax can be passed on to another person or group. A business may recover the cost of the taxes it pays by charging higher prices to customers. A tax shift occurs when the business shifts its taxes to others.

materials:

Activities

Activity 1: Classifying Direct and Indirect Taxes Classify taxes as Direct or Indirect.

Activity 2: Business Beginnings Discover how business location affects profits and taxes.

Activity 3: Chuck's Chocolate Factory How are profits affected when you shift rising property taxes to your customers?

Activity 4: Tax Your Memory Test you tax IQ when you play this memory concentration game.

Assessment

Complete the assessment page to test your understanding of Direct and Indirect Taxes.

quick check

What could a business do if it experiences an increase in its property tax rates?

tax trivia

Did You Know? Paper and metal aren't the only things used to make money. Under the rule of Aztec emperor Montezuma, the cocoa bean was used as currency.

Test your tax trivia knowledge by answering the following multiple-choice question by clicking on the correct answer. To assess your answer, click the Check My Answers button.

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