DEFINITION of 'Assessment'
Assessment occurs when an asset's value must be determined for the purpose of taxation. Assessments are made annually on certain types of property, such as homes and cars; other assessments may be made only once. For example, homes are often valued every three or four years according to their physical condition and comparable values of surrounding residences.
BREAKING DOWN 'Assessment'
Federal, state and local governments collect various taxes for products or services. The following are examples of U.S taxation.
Forty-five states and the District of Columbia impose a general sales tax. Alaska, Delaware, Montana, New Hampshire and Oregon do not. Those five states impose one or more other taxes, such as meal or lodging taxes, to increase their revenue.
When states began enacting sales tax, they imposed the tax on in-state sales only. Businesses offering delivery to customers started ordering products out of state to avoid paying sales tax. For this reason, states imposing sales tax began imposing use tax.
Use tax is imposed on customers who use, consume or store tangible property in a state. Out-of-state vendors not required to collect sales tax collect use tax on their sales. Because sales and use taxes are mutually exclusive, only one applies to a single transaction.
Excise tax is a flat tax applied to targeted items before setting a purchase price. Luxury goods and products or services contributing to health issues such as cigarettes, alcohol and tanning salons are subject to excise tax. Most excise taxes are determined by the state, but a few are determined by the federal government. The United States collects approximately 4% of its revenue from excise taxes.
Excise tax is levied on products and services with mass consumption as an easy method of generating revenue without increasing income or sales tax. For example, the federal government levies the same excise tax on each gallon of gasoline in every state, making up almost half the total excises the federal government collects. Many excise taxes are designated for maintaining publicly used systems. For example, the U.S. government justifies the gasoline excise tax because the revenue maintains roads throughout the country.
Excise tax on chemicals directly or indirectly harming the environment is designed for limiting their impact. Taxes on harmful substances such as tobacco and alcohol fund research and prevention and deter consumers from purchasing those items: as products’ prices increase, consumption often decreases.