Indirect Tax Legal Definition:

The passing on of a tax or duty by the person who first pays it, through subsequent transactions.

Related Terms: Direct Tax

John Bouvier, in his American Law Dictionary, wrote:

"Taxes are classified as direct, which includes those which are assessed upon the property, person, business, income etc. of those who pay them; and indirect, or those which are levied on commodities before they reach the consumer and are paid by those upon whom they ultimately fall, not as taxes, but as part of the market price of the commodity."

In Bank of Toronto, the Privy Council adopted these words:

"Taxes are either direct or indirect. A direct tax is one which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another....

"The producer or importer of a commodity is called upon to pay a tax on it, not with the intention to levy a ... contribution upon him, but to tax through him the consumers of the commodity, from whom it is supposed that he will recover the amount by means of an advance in price."

In Manitoba v Canada, the Privy Council added:

"An indirect tax is that which is demanded from one person in the expectation and with the intention that he shall indemnify himself at the expense of another."

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