McGraw-Hill/Irwin ©2011 The McGraw-Hill Companies, All Rights Reserved Chapter 19 Sales, Excise, and Property Taxes

Compute sales tax on goods sold involving trade and cash discounts and shipping charges 2. Explain and calculate excise tax Sales, Excise, and Property Taxes #19 Learning Unit Objectives Sales and Excise Taxes LU19.1

Calculate the tax rate in decimal 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 Sales, Excise, and Property Taxes #19 Learning Unit Objectives Property Tax LU19.2

19-4 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

19-5 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% 1.05 x $21.50 = $ = $26.08 Manual calculation Price Trade discount Taxable x Tax Taxable Shipping $26.08 Total price w/shipping

19-6 Calculating Actual Sales Actual sales = Total sales 1 + tax rate Register receipts total $40,000 for the day, which included a 7% sales tax. What are actual sales? $40,000 = $37, Check: Sales $37, x.07 = $2, $37, , = $40,000

19-7 Tax is based on a percentage of the retail price of a product or service Excise Tax Tax imposed on luxury items or nonessentials

19-8 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

19-9 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.

19-10 Determining the Tax Rate Tax Rate = Budget needed Total assessed value

19-11 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

19-12 Calculating Property Tax 1. Calculate assessed value of Bill’s home.40 x $210,000 = $84,000 From the following facts: (1) calculate assessed value of Bill’s home; (2) calculate the tax rate for the community in decimal (to nearest ten thousandths); (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 decimal, per $100, per $1,000, and 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

19-13 Calculating Property Tax a = 9.22% b x 100 = $9.22 c x 1000 = $92.20 d = 92.2 Mills (or.0922 x 1,000) 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) 2. Calculate the tax rate for the community in decimal (to nearest ten thousandths) 176,000 1,910,000 =.0922 per dollar

19-14 Calculating Property Tax.0922 x $84,000 = $7, $9.22 x 840 = $7, $92.20 x 84 = $7, x.01 x $84,000 = $7, Calculate the property tax due on Bill’s home in decimal, per $100, per $1,000, and in mills.

19-15 Expressing Tax Rate Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills 6.48% $6.48 $ Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills $63,000 x 6.48% $63,000 = 630$63,000 = x.001x $100 $1,000 $63, x $ x $64.80 $4, $4, $ 4, $ 4,082.40