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Chapter 6: Q.5 (page 140)

Suppose that a state has increased its sales tax rate every other year since 2009. Assume the state collected all sales taxes that residents legally owed. The table below summarizes its experience. What were total taxable sales in this state during each year displayed in the table?

Short Answer

Expert verified

Total sales for Years 2009, 2011, 2013, 2015, & 2017 is $300 $350 $400 $400, & $420 (in millions) respectively.

Step by step solution

01

Step 1. Meaning

Sales Tax Rate:When a good or service is purchased by a customer at retail, so the percentage of some amount added to that product or service is called Sales Tax.

02

Step 2. Explanation (2009)

Sales Tax Rate = 3%

Sales Tax Collection = $9 million

Formula Used:

Total Taxable Amount = 100 * Sales Tax Amount / Sales Tax Rate

By putting values into the formula

= 100 * 9 / 3

= 100 * 3

= 300

Total Taxable Amount for 3% = $300 million.

03

Step 3. Explanation (2011)

Sales Tax Rate = 4%

Sales Tax Collection = $14 million

Formula Used:

Total Taxable Amount = 100 * Sales Tax Amount / Sales Tax Rate

By putting values into the formula

= 100 * 14 / 4

= 100 * 3.5

= 350

Total Taxable Amount for 4% = $350 million.

04

Step 4. Explanation (2013)

Sales Tax Rate = 5%

Sales Tax Collection = $20 million

Formula Used:

Total Taxable Amount = 100 * Sales Tax Amount / Sales Tax Rate

By putting values into the formula

= 100 * 20 / 5

= 100 * 4

= 400

Total Taxable Amount for 5% = $400 million.

05

Step 5. Explanation (2015)

Sales Tax Rate = 6%

Sales Tax Collection = $24 million

Formula Used:

Total Taxable Amount = 100 * Sales Tax Amount / Sales Tax Rate

By putting values into the formula

= 100 * 24 / 6

= 100 * 4

= 400

Total Taxable Amount for 6% = $400 million.

06

Step 2. Explanation (2009)

Sales Tax Rate = 7%

Sales Tax Collection = $29.4 million

Formula Used:

Total Taxable Amount = 100 * Sales Tax Amount / Sales Tax Rate

By putting values into the formula

= 100 * 29.4 / 7

= 100 * 4.2

= 420

Total Taxable Amount for 7% = $420 million.

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