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

2. 19-2 1. 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

3. 19-3 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

4. 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

5. 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 = $22.58 + 3.50 = $26.08 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 w/shipping

6. 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 = $37,383.18 1.07 Check: Sales $37,383.18 x.07 = $2,616. 82 $37,383.18 + 2,616.82 = $40,000

7. 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

8. 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

9. 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.

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

11. 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

12. 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

13. 19-13 Calculating Property Tax a..0922 = 9.22% b..0922 x 100 = $9.22 c..0922 x 1000 = $92.20 d..0922.001 = 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

14. 19-14 Calculating Property Tax.0922 x $84,000 = $7,744.80 $9.22 x 840 = $7,744.80 $92.20 x 84 = $7,744.80 92.20 x.01 x $84,000 = $7,744.80 4. Calculate the property tax due on Bill’s home in decimal, per $100, per $1,000, and in mills.

15. 19-15 Expressing Tax Rate Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills 6.48% $6.48 $64.8064.80 Per $100 ofPer $1,000 of By percent assessed valueassessed value In mills $63,000 x 6.48% $63,000 = 630$63,000 = 63 64.80 x.001x $100 $1,000 $63,000 630 x $6.48 63 x $64.80 $4,082.40 $4,082.40 $ 4,082.40 $ 4,082.40

16. 19-16 Problem 19-16: $499, 094 $7,129,914 =.007 x 1,000 = $70 per $1,000 Budget shortfall : $7,129,914 $1000 = 7,129.92 x $60 = $427,795.20 $499,094.00 - $427,795.20 = $71,298.80 budget shortfall

17. 19-17 Problem 19-20: $700,000 $110,000,000 =.0064.0064.001 = 6.40 mills

18. 19-18 Problem 19-22: 18.50 x.001 x $80,000 = $1,480

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

20. 19-20 Problem 19-24: Mills x.001 x A = $ 2,500 55 x.001 x A = $ 2,500.055A = $ 2,500 A = $45,455