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19-2 Chapter 19 Sales, Excise, and Property Taxes McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

19-3 Compute sales tax on goods sold involving trade and cash discounts and shipping charges Explain and calculate excise tax Sales, Excise, and Property Taxes #19 Learning Unit Objectives Sales and Excise Taxes LU19.1

19-4 Calculate the tax rate in decimal Convert tax rate in decimal to percent, per $100 of assessed value, per $1,000 of assessed value, and in mills Compute property tax due Sales, Excise, and Property Taxes #19 Learning Unit Objectives Property Tax LU19.2

19-5 Taxes paid on certain goods and services Sales Tax The sales tax percent is set by each state. Merchants collect funds and forward them to government agencies

19-6 Sales Tax Compute sales tax and total price given the following information: Selling price of computer $700 Shipping charge $10.00 Trade discount 5% Sales Tax 5% Net Price $700 x.05 = $35 $700 - $35 = $665 Sales Tax $665 x.05 = $33.25 Cost$ Tax Shipping Total $ Check: 100% is base + 5% is tax = 105% 1.05 x $665 = $ = $708.25

19-7 Calculating Actual Sales Actual sales = Total sales 1 + tax rate Register receipts total $5,000 for the day, which included a 6% sales tax. What are actual sales? $5,000 = $4, Check: Sales $4, x.06 = $ $4, $ = $5,000

19-8 Tax is based on a percentage of the retail price of a product or service Excise Tax Tax imposed on luxury items or nonessentials

19-9 Excise Tax Barbara Fu bought a Mercedes Benz for $80,000. Sales tax is 6% and excise tax is 8%. What is her total cost? Cost$80,000 Sales tax$80,000 x.06 = $4,800 Excise tax$80,000 x.08 = $6,400 Total cost$91,200

19-10 Assessed value - The value of property for the purposes of computing property taxes Property Tax Assessed value = Assessment rate x Market value Property taxes pay for local fire and police protection, schools, etc. They are based on assessed value.

19-11 Determining the Tax Rate Tax Rate = Budget needed Total assessed value

19-12 Step 2. Identify tax rate Town budget needs Total assessed value Step 3. Calculate property tax due Tax rate x assessed value (Step 1 X Step 2) Step 1. Compute assessed value Assessment rate x Market value Calculating Property Tax

19-13 Calculating Property Tax Town Budget $5,000,000 Market value of home $160,000 Assessed rate 25% Total assessed values $65,000,000 $160,000 x.25 = $40,000 $5,000,000 = $65,000,000 $40,000 x.07692* = $3, *Rounded to nearest ten thousandth

19-14 Expressing Tax Rate Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills 7.69% $7.69 $ Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills $40,000 x 7.69% $40,000 = 400$40,000 = x.001x $100 $1,000 $40, x $ x $76.90 $3,076 $3,076