Ron Larson
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2.3 Consumption Taxes

2.3 Consumption Taxes
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  • 23. Local Sales Tax Rate

    While on vacation in Florida, you buy a pair of sunglasses for the beach. The state sales tax rate in Florida is 6%. What is the local sales tax rate?

    • Worked-Out Solution

      The state sales tax of 6% on $120 is

      Because the total sales tax was $8.40, the local sales tax was

      This is a rate of

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      _____    _    _     _  _    _    _      _____  
 /  ___|| | || | ||  | \| || | || | ||   / ___// 
| // __   | || | ||  |  ' || | || | ||   \___ \\ 
| \\_\ || | \\_/ ||  | .  || | \\_/ ||   /    // 
 \____//   \____//   |_|\_||  \____//   /____//  
  `---`     `---`    `-` -`    `---`   `-----`
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  • 24. Internet Shopping

    Your friend loves the sunglasses you bought while on vacation in Florida. She decides to buy the same pair of sunglasses from the Ray's Beachwear website. What might be the total cost for her order? Explain.

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                ______    _  _     _____     _____   
  ____     /_   _//  | \| ||  |  ___||  /  ___|| 
 |    \\    -| ||-   |  ' ||  | ||__   | // __   
 | [] ||    _| ||_   | .  ||  | ||__   | \\_\ || 
 |  __//   /_____//  |_|\_||  |_____||  \____//  
 |_|`-`    `-----`   `-` -`   `-----`    `---`   
 `-`
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  • 25. Exemptions for Sales Tax

    Some items are not subject to sales tax in certain tax jurisdictions. The rules for exempt status can vary greatly from state to state. The state sales tax rate applied on the sales receipt shown below is 6%. Which item is exempt from sales tax?

    • Worked-Out Solution

      At first glance, it seems like there is more than one possibility. However, after some trial and error, you can discover that there is a 6% sales tax rate on

      One state in which this transaction could have occurred is Pennsylvania. It has a 6% state sales tax on "nonneccessities." Necessities, such as ordinary groceries and ordinary clothing, are tax exempt.

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                 ___     _    _      ___      _____   
    ___     / _ \\  | |  | ||   / _ \\   / ____|| 
   /   ||  | / \ || | |/\| ||  / //\ \\ / //---`' 
  | [] ||  | \_/ || |  /\  || |  ___  ||\ \\___   
   \__ ||   \___//  |_// \_|| |_||  |_|| \_____|| 
    -|_||   `---`   `-`   `-` `-`   `-`   `----`  
     `-`
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  • 26. Other Excise Taxes

    One of the main purposes of an excise tax is to discourage certain behavior. Name one item or service (not listed in this textbook) that you think should have an excise tax. Explain how you would define the tax structure, including the rate.

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     _____     __   __    ____     __   __  __    __  
|  __ \\   \ \\/ //  |  _ \\   \ \\/ // \ \\ / // 
| |  \ ||   \ ` //   | |_| ||   \ ` //   \ \/ //  
| |__/ ||    | ||    | .  //     | ||     \  //   
|_____//     |_||    |_|\_\\     |_||      \//    
 -----`      `-`'    `-` --`     `-`'       `
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  • 27. Value-Added Tax on Furniture

    The value-added tax spreadsheet shows each stage of the production of a dining room table set. Complete the spreadsheet. What is the tax rate?

    • Worked-Out Solution

      From the given spreadsheet, you can see that there is a tax of $90 on the raw materials of $1200. This is a rate of

      Using this rate, you can complete the spreadsheet as follows.

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      _____      ___     ______     ______   _    _   
 |__  //    / _ \\  |      \\  /_   _// | \  / || 
   / //    / //\ \\ |  --  //   -| ||-  |  \/  || 
  / //__  |  ___  |||  --  \\   _| ||_  | .  . || 
 /_____|| |_||  |_|||______//  /_____// |_|\/|_|| 
 `-----`  `-`   `-` `------`   `-----`  `-`  `-`
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  • 28. National Sales Tax

    There has been some discussion about whether the United States should implement a national sales tax in addition to existing state and local sales taxes. Suppose you are entering a debate about a national sales tax. Use the Internet to research the topic. Would you be in favor of or opposed to a national sales tax? Explain your reasoning.

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       _____     ___      ______    ______    _____   
  / ___//   / _ \\   /_   _//  /_   _//  /  ___|| 
  \___ \\  | / \ ||  `-| |,-    -| ||-  | // __   
  /    //  | \_/ ||    | ||     _| ||_  | \\_\ || 
 /____//    \___//     |_||    /_____//  \____//  
`-----`     `---`      `-`'    `-----`    `---`
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