1. SALES, EXCISE, AND PROPERTY TAXES Chapter Eight Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. 1. Compute sales tax on goods sold involving trade and cash discounts and shipping charges. 2. Explain and calculate excise tax. LU 8-1: Sales and Excise Taxes LEARNING UNIT OBJECTIVES LU 8-2: Property Tax 1. Calculate the tax rate in decimal. 8-2 2. Convert tax rate in decimal to percent, per $100 of assessed value, per $1,000 of assessed value, and in mills. 3. Compute property tax due.

3. Sales taxes are 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. 8-3

4. SALES TAX Compute sales tax and total price given the following information: Selling price of battery: $32 Shipping charge: $3.50 Trade discount: $10.50 Sales tax: 5% Check 100% is base + 5% is tax = 105% Manual calculation $32.00 Price - 10.50 Trade discount $21.50 Taxable x.05 $ 1.08 Tax + 21.50 Taxable + 3.50 Shipping $26.08 Total price 1.05 x $21.50 = $22.58 8-4 w/tax & shipping + $3.50 shipping $26.08

5. CALCULATING ACTUAL SALES Actual sales = Total sales 1 + Tax rate Total sales for the day were $40,000, which included a 7% sales tax. What were the actual sales? $40,000 1.07 Check = $37,383.18 Sales $37,383.18 x.07 = $2,616.82 $37,383.18 + $2,616.82 = $40,000 8-5 Example:

6. Excise tax is based on a percentage of the selling price of a product or service. EXCISE TAX Excise tax is imposed on luxury items or nonessentials. 8-6

7. EXCISE TAX Angel Rowe bought a fur coat for $5,000. Sales tax is 7% and excise tax is 8%. What is her total cost? Cost $5,000 Sales tax($5,000 x.07) = 350 Excise tax($5,000 x.08) = + 400 Total cost $5,750 8-7

8. 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. 8-8

9. ASSESSED VALUE Assessed value = Assessment rate x Market value The market value of Bill’s home is $210,000. Property is assessed at 30% of the market value. What is the assessed value of Bill’s home? $210,000 x.30 = $63,000 assessed value 8-9

10. DETERMINING THE TAX RATE Budget needed Total assessed value Tax rate = 8-10 Our town budget is $125,000, and we have a total assessed property value of $1,930,000. $125,000 $1,930,000 = $.0647668 =.0648 tax rate per dollar

11. HOW THE TAX RATE IS EXPRESSED We can express the.0648 tax rate per dollar in the following forms: Per $100 ofPer $1,000 of By Percent Assessed ValueAssessed ValueIn Mills 6.48% $6.48 $64.8064.80 (.0648 x 100) (.0648 ÷ 1000) (.0648 ÷.001)

12. HOW TO CALCULATE PROPERTY TAX DUE 8-12 Total property tax due (P) = Tax rate (R) x Total assessed value (B) $4,082.40 =.0648 x $63,000

13. EXPRESSING TAX RATE IN VARIOUS FORMS Per $100 ofPer $1,000 of By Percent Assessed ValueAssessed ValueIn Mills 6.48% $6.48 $64.8064.80 Per $100 ofPer $1,000 of By Percent Assessed ValueAssessed ValueIn Mills $63,000 x 6.48% $63,000 = 630$63,000 = 6364.80 x.001 x $63,000 $100 $1,000 630 x $6.4863 x $64.80 = $4,082.40 = $4,082.40 8-13