Lecture Practical business math procedures (11/e) - Chapter 19: Sales, excise, and property taxes

After studying this chapter you will be able to: Compute sales tax on goods sold involving trade and cash discounts and shipping charges, explain and calculate excise tax, calculate the tax rate in decimal, compute property tax due.

SALES, EXCISE, AND PROPERTY TAXES Chapter Nineteen McGraw­Hill/Irwin Copyright © 2014 by The McGraw­Hill Companies, Inc. All rights reserved Learning unit objectives LU19-1: Sales and Excise Taxes Compute sales tax on goods sold involving trade and cash discounts and shipping charges Explain and calculate excise tax LU 19-2: Property Tax 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 19­2 Sales Tax Sales taxes are paid on certain goods and services The sales tax percent is set by each state Merchants collect funds and forward them to government agencies 19­3 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% Manual calculation 32.00 Price -10.50 Trade discount 21.50 Taxable x 05 1.08 +21.50 +3.50 $26.08 Tax Taxable Shipping Total price w/shipping Check 100% is base + 5% is tax = 105% 1.05 x $21.50 = $22.58 + 3.50 = $26.08 19­4 Calculating Actual Sales Actual sales = Total sales + Tax rate Example: Register receipts total $40,000 for the day, which included a 7% sales tax What are actual sales? $40,000 = $37,383.18 1.07 Check Sales $37,383.18 x 07 = $2,616.82 $37,383.18 + 2,616.82 = $40,000 19­5 Excise Tax Excise tax is imposed on luxury items or nonessentials Excise tax is based on a percentage of the retail price of a product or service 19­6 Excise Tax Angel Rome 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 $5,750 19­7 Property Tax Property taxes pay for local fire and police protection, schools, etc They are based on assessed value Assessed value – The value of property for the purposes of computing property taxes Assessed value = Assessment rate x Market value 19­8 Determining the Tax Rate Tax rate = Budget needed Total assessed value 19­9 CALCULATING PROPERTY TAX Step Compute assessed value Assessment rate x Market value Step Identify tax rate Town budget needs Total assessed value Step Calculate property tax due Tax rate x Assessed value (Step x Step 2) 19­10 Calculating Property Tax From the following facts: (1) calculate the assessed value of Bill’s home; (2) calculate the tax rate for the community in decimal (to nearest ten thousandth); (3) convert the decimal to (a) %, (b) per $100 of assessed value, (c) per $1,000 of assessed value, and (d) in mills (to nearest hundredth); and (4) calculate the property tax due on Bill’s home in (a) decimal, (b) per $100, (c) per $1,000, and (d) in mills Given: Assessed market value: 40% Total budget needed: $176,000 Market value of Bill’s home: $210,000 Total assessed value: $1,910,000 Calculate the assessed value of Bill’s home: 40 x $210,000 = $84,000 19­11 Calculating Property Tax (cont.) Calculate the tax rate for the community in decimal (to nearest ten thousandths): 176,000 1,910,000 = 0922 per dollar Convert the decimal to (a) %, (b) per $100 of assessed value, (c) per $1,000 of assessed value, and (d) in mills (to nearest hundredth): a b c d .0922 = 9.22% 0922 x 100 = $9.22 0922 x 1000 = $92.20 0922 / 001 = 92.2 Mills (or 0922 x 1,000) 19­12 Calculating Property Tax (cont.) Calculate the property tax due on Bill’s home in decimal, per $100, per $1,000, and in mills a .0922 x $84,000 = $7,744.80 b $9.22 x 840 = $7,744.80 c $92.20 x 84 = $7,744.80 d 92.20 x 01 x $84,000 = $7,744.80 19­13 Expressing Tax Rate By Percent 6.48% Per $100 of Per $1,000 of Assessed Value Assessed Value In Mills $6.48 $64.80 64.80 Per $100 of Per $1,000 of By Percent Assessed Value Assessed Value In Mills $63,000 x 6.48% $63,000 = 630 $63,000 = 63 64.80 x 001 x $63,000 $100 $1,000 630 x $6.48 = $4,082.40 = $4,082.40 63 x $64.80 = $4,082.40 = $4,082.40 19­14 ... unit objectives LU1 9-1 : Sales and Excise Taxes Compute sales tax on goods sold involving trade and cash discounts and shipping charges Explain and calculate excise tax LU 1 9-2 : Property Tax Calculate... assessed value, and in mills Compute property tax due 19­2 Sales Tax Sales taxes are paid on certain goods and services The sales tax percent is set by each state Merchants collect funds and forward... 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 $5,750 19­7 Property Tax Property taxes pay for local fire and