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Chapter 19
Sales, Excise, and
Property Taxes
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McGraw-Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
#19
Sales, Excise, and Property Taxes
Learning Unit Objectives
LU19.1 Sales and Excise Taxes
1-3
•
Compute sales tax on goods sold involving
trade and cash discounts and shipping charges
•
Explain and calculate excise tax
Sales Tax
Taxes paid on certain goods
and services
1-4
The sales tax percent is set by
each state. Merchants collect
funds and forward them to
government agencies
Sales Tax
Compute sales tax and total
price given the following
information:
Net Price
$700 x.05 = $35
$700 - $35 = $665
Sales Tax
Selling price of computer $700
Shipping charge $10.00
Trade discount 5%
Sales Tax 5%
$665 x .05 = $33.25
Cost
Tax
33.25
Shipping
10.00
Total
1-5
$665.00
$708.25
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?
Check:
$5,000 = $4,716.98
1.06
Sales $4,716.98 x .06 = $283.02
$4,716.98 + $283.02 = $5,000
1-6
Excise Tax
Imposed on luxury items or nonessentials
Tax is based on a percentage of the
retail price of a product or service
1-7
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
1-8
$80,000
Sales tax
$80,000 x .06 = $4,800
Excise tax
$80,000 x .08 = $6,400
Total cost
$91,200
#19
Sales, Excise, and Property Taxes
Learning Unit Objectives
LU19.2 Property Tax
1-9
•
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
Property Tax
Property taxes pay for local
fire and police protection,
schools, etc . They are based
on assessed value.
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Assessed value - The value of
property for the purposes of
computing property taxes
Assessed value = Assessment
rate x Market value
Calculating Property Tax
Step 3. Calculate property tax due
Tax rate x assessed value
Step 2. Identify tax rate
Town budget needs
Total assessed value
Step 1. Compute assessed value
Assessment rate x Market value
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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
$160,000 x .25 = $40,000
$5,000,000/$65,000,000 = .076923
$40,000 x .07692* = $3,076.80
*Rounded to nearest ten thousandth
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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
$5,000,000/$65,000,000 = .076923
By percent
7.69%
1-14
Per $100 of
Per $1,000 of
In
assessed value
$100 x R%
$7.69
assessed value
$1,000 x R%
$76.90
mills
R / .001
76.90
Expressing Tax Rates
$5,000,000/$65,000,000 = .076923
By percent
7.69%
Per $100 of
Per $1,000 of
In
assessed value
$7.69
assessed value
$76.90
mills
76.90
Taxes on a home with a value of $40,000:
By percent
$40,000
x 7.69%
$3,076
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Per $100 of
Per $1,000 of
assessed value
assessed value
In mills
Expressing Tax Rates
$5,000,000/$65,000,000 = .076923
By percent
7.69%
Per $100 of
Per $1,000 of
In
assessed value
$7.69
assessed value
$76.90
mills
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
$40,000
$40,000 / 100
x 7.69%
= $400
400 x $7.69
$3,076
1-16
$3,076
In mills
Expressing Tax Rates
$5,000,000/$65,000,000 = .076923
By percent
7.69%
Per $100 of
Per $1,000 of
In
assessed value
$7.69
assessed value
$76.90
mills
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
$40,000
$40,000 / 100
$40,000 / 1000
x 7.69%
$3,076
1-17
= $400
= 40
400 x $7.69
40 x 76.90
$3,076
$3,076
In mills
Expressing Tax Rates
$5,000,000/$65,000,000 = .076923
By percent
7.69%
Per $100 of
Per $1,000 of
In
assessed value
$7.69
assessed value
$76.90
mills
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
$40,000
$40,000 / 100
$40,000 / 1000
x 7.69%
$3,076
1-18
= $400
= 40
In mills
$40,000
x .001
400 x $7.69
40 x 76.90
x 76.90
$3,076
$3,076
$3,076