The city of Philadelphia imposes a 10 percent tax on sales of liquor in the city. According to the city's website, the liquor tax "is technically paid by retail customers at the point of sale. However, the seller is responsible for and paying the tax on a monthly basis." Source: "Liquor Tax," phila.gov, December 13, 2018.
What does the city mean that the liquor tax is technically paid by retail customers at the point of sale? Are the prices that customers pay for liquor 10 percent higher than they would be if there were no tax? The tax is technically paid by retail customers at the point of sale in the sense that:
A. The customer's receipt will indicate that they paid a tax equal to 10% of the price of the liquor. The buyer would pay all of the tax only in the unlikely case that the demand curve for liquor is horizontal.
B. They are immediately charged 10% more than they would have been in the absence of a tax. In other words, the buyer pays all of the tax.
C. They are immediately charged 10% more than they would have been in the absence of a tax. However, sellers lower the price they charge by 10% to offset the tax, so buyers actually don't end up paying any more than they otherwise would have.
D. The customer's receipt will indicate that they paid a tax equal to 10% of the price of the liquor. The price the customer paid is higher than it would be if there were no tax, but it will be less than 10% higher because the tax is actually paid partly by liquor sellers. Legally responsible for filing and paying the tax with the city, would it change.