Ad valorem tax

An ad valorem tax is a levy imposed on the value of assets. This charge is calculated as a percentage of an asset’s value, where the value is derived from a periodic assessment. A prime example of an ad valorem tax is the property tax. Ad valorem taxes typically comprise a large proportion of the total revenue of state and local government entities. This type of tax is usually calculated and imposed on a periodic basis (such as annually), while sales taxes are imposed whenever a sale transaction occurs.