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Chapter 19Chapter 19

Sales, Excise, and Sales, Excise, and Property TaxesProperty Taxes

McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

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• Compute sales tax on goods sold involving trade and cash discounts and shipping charges

• Explain and calculate excise tax

Sales, Excise, and Property Taxes#19#19Learning Unit Objectives

Sales and Excise TaxesLU19.1LU19.1

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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

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Sales Tax

Compute sales tax and total price given the following

information:

Selling price of computer $700Shipping charge $10.00

Trade discount 5%Sales Tax 5%

Net Price

$700 x.05 = $35

$700 - $35 = $665

Sales Tax

$665 x .05 = $33.25

Cost $665.00

Tax 33.25

Shipping 10.00

Total $708.25

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Calculating Actual Sales

Actual sales = Total sales 1 + tax rate

Register receipts total $5,000 for the day, which included a 6% sales tax. What are

actual sales?

$5,000 = $4,716.98 1.06

Check:

Sales $4,716.98 x .06 = $283.02

$4,716.98 + $283.02 = $5,000

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Tax is based on a percentage of the retail price of a product or service

Excise Tax

Imposed on luxury items or nonessentials

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Excise Tax

Barbara Fu bought a Mercedes Benz for $80,000. Sales tax is 6% and excise

tax is 8%. What is her total cost?

Cost $80,000

Sales tax $80,000 x .06 = $4,800

Excise tax $80,000 x .08 = $6,400

Total cost $91,200

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• 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

Sales, Excise, and Property Taxes#19#19Learning Unit Objectives

Property TaxLU19.2LU19.2

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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.

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Step 2. Identify tax rate

Town budget needsTotal assessed value

Step 3. Calculate property tax due

Tax rate x assessed value

Step 1. Compute assessed value

Assessment rate x Market value

Calculating Property Tax

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Calculating Property Tax

Town Budget $5,000,000

Market value of home $160,000

Assessed rate 25%

Total assessed values $65,000,000

*Rounded to nearest ten thousandth

$160,000 x .25 = $40,000

$5,000,000/$65,000,000 = .076923

$40,000 x .07692* = $3,076.80

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Calculating Property Tax• The Town of Pliver has approved next year’s budget of

$1,355,000. The total property value in the town is $58,600,000. The State has determined their assessment ratio to be 95%. • What will next year’s tax rate be?• 1355/58600 =.0231• What will be the taxes on a home valued at

$150,000?• 150000 x .95 = 142500• 142500 x .0231 = 3291.75

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Expressing Tax Rates

Per $100 of Per $1,000 of In

By percent assessed value assessed value mills

7.69% $100 x R% $1,000 x R% R / .001

$7.69 $76.90 76.90

$5,000,000/$65,000,000 = .076923

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Expressing Tax Rates

Per $100 of Per $1,000 of In

By percent assessed value assessed value mills

7.69% $7.69 $76.90 76.90

Taxes on a home with a value of $40,000:

Per $100 of Per $1,000 of

By percent assessed value assessed value In mills

$40,000

x 7.69%

$3,076

$5,000,000/$65,000,000 = .076923

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Expressing Tax Rates

Per $100 of Per $1,000 of In

By percent assessed value assessed value mills

7.69% $7.69 $76.90 76.90

Taxes on a home with a value of $40,000:

Per $100 of Per $1,000 of

By percent assessed value assessed value In mills

$40,000 $40,000 / 100

x 7.69% = $400

400 x $7.69

$3,076 $3,076

$5,000,000/$65,000,000 = .076923

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Expressing Tax Rates

Per $100 of Per $1,000 of In

By percent assessed value assessed value mills

7.69% $7.69 $76.90 76.90

Taxes on a home with a value of $40,000:

Per $100 of Per $1,000 of

By percent assessed value assessed value In mills

$40,000 $40,000 / 100 $40,000 / 1000

x 7.69% = $400 = 40

400 x $7.69 40 x 76.90

$3,076 $3,076 $3,076

$5,000,000/$65,000,000 = .076923

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Expressing Tax Rates

Per $100 of Per $1,000 of In

By percent assessed value assessed value mills

7.69% $7.69 $76.90 76.90

Taxes on a home with a value of $40,000:

Per $100 of Per $1,000 of

By percent assessed value assessed value In mills

$40,000 $40,000 / 100 $40,000 / 1000$40,000

x 7.69% = $400 = 40 x .001

400 x $7.69 40 x 76.90 x 76.90

$3,076 $3,076 $3,076 $3,076

$5,000,000/$65,000,000 = .076923