SALES, EXCISE, AND PROPERTY TAXES Chapter Nineteen Copyright © 2014 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. LU19-1: Sales and Excise Taxes LEARNING UNIT OBJECTIVES LU 19-2: Property Tax 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.

19-3 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.

19-4 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 Price Trade discount Taxable x Tax Taxable Shipping $26.08 Total price w/shipping 1.05 x $21.50 = $ = $26.08

19-5 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, Check = $37, Sales $37, x.07 = $2, $37, , = $40,000 Example:

19-6 Excise tax is based on a percentage of the retail price of a product or service. EXCISE TAX Excise tax is imposed on luxury items or nonessentials.

19-7 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

19-8 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.

19-9 DETERMINING THE TAX RATE Budget needed Total assessed value Tax rate =

19-10 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

19-11 CALCULATING PROPERTY TAX 1. Calculate the assessed value of Bill’s home:.40 x $210,000 = $84,000 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

19-12 CALCULATING PROPERTY TAX (CONT.) a = 9.22% 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 b x 100 = $9.22 c x 1000 = $92.20 d /.001 = 92.2 Mills (or.0922 x 1,000)

19-13 CALCULATING PROPERTY TAX (CONT.) a x $84,000 = $7, Calculate the property tax due on Bill’s home in decimal, per $100, per $1,000, and in mills. b. $9.22 x 840 = $7, c. $92.20 x 84 = $7, d x.01 x $84,000 = $7,744.80

19-14 EXPRESSING TAX RATE Per $100 ofPer $1,000 of By Percent Assessed ValueAssessed ValueIn Mills 6.48% $6.48 $ Per $100 ofPer $1,000 of By Percent Assessed ValueAssessed ValueIn Mills $63,000 x 6.48% $63,000 = 630$63,000 = x.001 x $63,000 $100 $1, x $ x $64.80 = $4, = $4,082.40