Chapter 19 Sales, Excise, and Property Taxes Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

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

19-16 Problem 19-16: $499, 094 $7,129,914 =.007 x 1,000 = $70 per $1,000 Budget shortfall : $7,129,914 $1000 = 7, x $60 = $427, $499, $427, = $71, budget shortfall

19-17 Problem 19-20: $700,000 $110,000,000 = = 6.40 mills

19-18 Problem 19-22: x.001 x $80,000 = $1,480

19-19 Problem 19-23: 7.9 x.001 x $285,000 = $2,251.50

19-20 Problem 19-24: Mills x.001 x A = $ 2, x.001 x A = $ 2, A = $ 2,500 A = $45,455