ACC 430 Chapter 1 Homework

This year, Company LI built a light industrial facility in County G. The assessed property tax value of the facility is $20 million. To convince Company LI to locate within its jurisdiction, the county abated its 4 percent property tax for the year. Because of the local economic boom created by the new facility, the aggregate assessed value of County G's property tax base (including the LI facility) increased by $23 million. Compute the net effect on County G's current year tax revenue from the abatement.

($20,000,000 * .04) = $800,000 ($23,000,000 * .04) = $920,000 ($920,000 - $800,000) = $120,000

How do tax payments differ from other payments that people or organizations make to governmental agencies?

Tax payments differ from government fines and penalties because they are not intended to deter or punish unacceptable behavior. Tax payments differ from fees or user charges because they do not entitle the payer to a specific government good or services and they are compulsory.

Firm H operates its business in State H, which levies a 6 percent sales and use tax. This year, the firm purchased a $600,000 item of tangible property in State K and paid $18,000 sales tax to the state. It also purchased a $750,000 item of tangible property in State L and paid $48,750 sales tax to the state. Firm H transported both items of property into State H for use in its business. 1. Compute the use tax that Firm H owes to State H for the property purchased in State K. 2. Compute the use tax that Firm H owes to State H for the property purchased in State L.

1. ($600,000 * .06) = $36,000 Paid = $18,000 ($36,000 - $18,000) = 18000 2. ($750,000 * .06 ) = $45,000 Paid = $48,750 Because $48,750 > $45,000 Firm H does not owe used tax, so $0

Mrs. DK, a resident of Rhode Island, traveled to Delaware to purchase an oil painting from a local artist. The cost of the painting was $9,400. Rhode Island has a 7 percent sales and use tax, while Delaware has no sales and use tax. 1. How much Rhode Island use tax does Mrs. DK owe on the purchase she made in Delaware? 2. How much Rhode Island use tax would Mrs. DK owe if she purchased the painting from a gallery in New York City and paid 8.75 percent state and local sales tax on the transaction? 3. How much Rhode Island use tax would Mrs. DK owe if she purchased the painting from a dealer in Milwaukee and paid Wisconsin's 5 percent sales tax on the transaction?

1. ($9,400 * .07) = $658 paid = $0 Mrs. DK Use Tax owed = $658 2. ($9,400 * .07) = $658 Paid = ($9,400 * .0875) = $822.5 Mrs. Dk Use Tax owed = ($822.5 > $658) = $0 3. ($9,400 * .07) = $658 Paid = ($9,400 * .05) = $470 Mrs. Dk Use Tax owed = ($658 - $470) = $188

TR Company conducts business exclusively in State V, which levies a 5 percent sales and use tax on goods purchased or consumed in-state. This year, TR bought equipment in State B. The cost of the equipment was $90,000, and TR paid $5,400 sales tax to State B. TR also bought machinery in State D. The cost of the machinery was $200,000, and TR paid $7,000 sales tax to State D. 1. How much use tax does TR Company owe to State V with respect to the equipment bought in State B? 2. How much use tax does TR Company owe to State V with respect to the machinery bought in State D?

1. ($90,000 * .05) = $4,500 Paid = $5,400 Use tax owed = $0 2. ( $200,000 * .05) = $10,000 paid= $7,000 Use tax owed= ( $10,000 - $7,000) = $3,000

Firm L, which operates a mail-order clothing business, is located in State L. This year, the firm shipped $18 million of merchandise to customers in State R. State R imposes a 6 percent sales and use tax on the purchase and consumption of retail goods within the state. 1. Do State R residents who purchased Firm L merchandise owe use tax on their purchases? 2. If State R could legally require Firm L to collect a 6 percent tax on mail-order sales made to residents of the state, how much additional revenue would the state collect?

1. Yes, State R residents who purchased Firm L merchandise owe use tax on their purchases. 2. ($18,000,000 * .06) = $1,080,000

Monroe county levies a tax on the value of real property located within the county. The tax equals 3 percent of the property's assessed value up to $2 million plus 1 percent of the value in excess of $2 million. 1. Compute the tax on real property valued at $1.3 million. 2. Compute the tax on real property valued at $4.5 million

3% value up to $2 million Plus 1% of the value in excess of $2 million 1. $1.3 million property: (1,300,000 million * 0.03)= $39,000 2. $4.5 million property: (2,000,000 * .03) = $60000 (4,500,000 - 2,000,000)= $2500000 (2500000 * .01) = $25000 (60,000 + 25,000) = $85,000

Mr. JK, a U.S. citizen and resident of Vermont, owns 100 percent of the stock of JK Services, which is incorporated under Vermont law and conducts business in four counties in the state. JK Services owns 100 percent of the stock of JK Realty, which is incorporated under Massachusetts law and conducts business in Boston. b1. Identify the governments with jurisdiction to tax to Mr. JK b2. Identify the governments with jurisdiction to tax to JK Services. b3. Identify the governments with jurisdiction to tax to JK Realty.

B1. U.S. Government, State of Vermont, Local (County) Governments B2. U.S. Government, State of Vermont, Local (County) Governments B3. U.S. Government, State of Massachusetts, City of Boston

This year, State A raised revenues by increasing its general sales tax rate from 5 percent to 6 percent. Because of the increase, the volume of taxable sales declined from $800 million to $710 million. In contrast, State Z raised revenues from its 5 percent sales tax by expanding the tax base to include certain retail services. The volume of services subject to tax was $50 million. Compute the additional revenue raised by State A. Compute the additional revenue raised by State Z.

Jurisdiction A: Volume of sales before rate increase $800,000,000 Original tax rate .05 Revenue before rate increase $40,000,000 Volume of sales after rate increase $710,000,000 New tax rate .06 Revenue after rate increase $42,600,000 Additional revenue ($42,600,000 -$40,000,000) $2,600,000 Jurisdiction Z: Volume of sales added to tax base $50,000,000 Tax rate .05 Additional revenue $2,500,000

Mr. and Mrs. CS operate a hardware store in a jurisdiction that levies both a sales tax on retail sales of tangible personalty and an annual personal property tax on business tangibles. The personal property tax is based on book value as of December 31. This year, Mr. and Mrs. CS purchased $840,000 of inventory for their store. a. Are Mr. and Mrs. CS required to pay sales tax on the purchase of the inventory? Yes No b. How can Mr. and Mrs. CS minimize their personal property tax by controlling the timing of their inventory purchases? Minimize inventory on hand as of December 31 Minimize inventory on hand as of March 31 Minimize inventory on hand as of December 1 Minimize inventory on hand as of April 30

a. No b. Minimize inventory on hand as of December 31

In each of the following cases, determine if the United States has jurisdiction to tax Mr. KT. a. Mr. KT is a U.S. citizen but has been a permanent resident of Belgium since 1993. U.S. has jurisdiction U.S. does not have jurisdiction b. Mr. KT is a citizen and resident of Canada. He owns an apartment building in Buffalo, New York, that generates $18,000 annual net rental income. c. Mr. KT is a citizen of Singapore but is a permanent resident of St. Louis, Missouri. d. Mr. KT, a citizen and resident of Greece, is a partner in Sophic Partnership, which conducts business in 12 countries, including the United States.

a. U.S has jurisdiction b. U.S has jurisdiction c. U.S has jurisdiction d. U.S has jurisdiction