Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which of the following taxes is NOT a direct tax?

Inheritance tax
Corporate tax
Sales tax
Income tax

The correct answer is: Sales tax

Sales tax is classified as an indirect tax rather than a direct tax. This classification is based on the fact that sales tax is levied on the sale of goods and services and is typically collected by the seller at the point of sale. It is ultimately passed on to the consumer, who bears the burden of the tax. In contrast, direct taxes, such as inheritance tax, corporate tax, and income tax, are assessed on individuals or entities based on their income, wealth, or gains, and they are not transferable to another party. Understanding this distinction is crucial when analyzing taxation types in any economic or financial context.