Which of the following taxes is not classified as a direct tax?

Introduction / Context:
Taxation is often divided into two broad categories: direct taxes and indirect taxes. Understanding the difference between them is important in public finance, economics, and competitive exams. Direct taxes are levied directly on income or wealth, whereas indirect taxes are levied on goods and services and collected through intermediaries. This question asks you to identify which tax listed is not a direct tax.

Given Data / Assumptions:

• Direct taxes are charges on income, profits, or wealth, paid directly by the person or entity on whom they are imposed.
• Indirect taxes are embedded in the price of goods and services and are collected by sellers or intermediaries from consumers.
• Corporation tax, wealth tax, and estate tax are examples typically classified as direct taxes.
• Sales tax or general consumption tax is a classic example of an indirect tax.

Concept / Approach:
A key distinction is who bears the legal and practical incidence of the tax. With direct taxes, such as income tax or corporation tax, the taxpayer pays the tax directly to the government and cannot easily shift it to another person. In contrast, indirect taxes like sales tax, VAT, or GST are collected from consumers by businesses, which then remit the tax to the government. The legal incidence may fall on the seller, but the economic burden is usually passed on to the consumer through higher prices.

Step-by-Step Solution:
Step 1: Analyse sales tax. It is added to the price of goods and services and collected by retailers from customers at the point of sale. Step 2: Recognise that customers may not pay the tax directly to the government; instead, the seller remits the collected tax, making sales tax an indirect tax. Step 3: Evaluate corporation tax. It is levied directly on the profits of companies and paid by the company to the tax authorities, making it a direct tax. Step 4: Evaluate wealth tax. It is imposed on the net wealth of individuals or entities and paid directly to the government by the assessed person, so it is a direct tax. Step 5: Evaluate estate or inheritance tax. It is charged on the transfer of property at death and paid by the estate or heirs directly to the government; this is also a direct tax. Step 6: Conclude that the only tax listed which is not a direct tax is sales tax, making option a correct.

Verification / Alternative check:
In many countries, including those that have moved to VAT or GST systems, sales tax type levies are always categorised as indirect taxes in official documents and textbooks. They appear in the classification of indirect taxes along with customs duties and excise duties. Corporate income tax, wealth tax, and estate tax are consistently grouped under direct taxes based on income or wealth. This widespread classification confirms that sales tax is the odd one out in this list.

Why Other Options Are Wrong:
Corporation tax is a classic direct tax; it directly targets company profits and is paid by the company itself. Wealth tax is charged directly on the ownership of assets or net wealth and cannot be shifted easily, so it is a direct tax. Estate or inheritance tax is paid directly by the estate or beneficiary; it is also classified as a direct tax. Therefore, options b, c, and d all describe direct taxes and cannot be the correct answer to the question asking for a tax that is not direct.

Common Pitfalls:
Students sometimes confuse the terms direct and indirect with personal and impersonal or with visible and invisible taxes. Another common mistake is to think that any tax paid by companies is indirect simply because companies sell goods and services. The correct approach is to focus on what is being taxed (income, wealth, or spending) and on how the tax is collected and shifted. Remember that taxes on spending, like sales tax and GST, are indirect, while taxes on income and wealth are direct.

Final Answer:
The tax that is not a direct tax is sales tax (or general consumption tax on goods and services).