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| Example 1: |
Mr. Smith and his family came to the USA for a visit from
Melbourne, Australia. After purchasing $32.00 in clothing at a department
store, he was presented with a bill for $34.36. Why did the department store
charge him the additional $2.36? How did the department store compute this
amount? What amount should Mr. Smith pay? |
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| Analysis: |
The department store was adding sales tax to the
bill. Sales tax is a tax on goods and services purchased and is normally a
certain
percentage
added to the buyer's cost.
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| Solution: |
2.36 ÷ $32.00 = 0.0735. Sales tax was
charged by the department store at a rate of 7.375%.
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| Answer: |
Mr. Smith should pay the department store
$32.00 plus $2.36 in sales tax for a total bill of $34.36.
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Sales tax rates vary from state to state. Retail sales tax rates are set by
the individual states in the United States and vary from 0 to 9% of the sales
price. Sales tax is usually the responsibility of the merchant to collect and
submit to the state, and stated separately (or implicitly added at the time of
the sale) to consumers. Let's look at some more examples of sales tax.
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| Example 2: |
If the sales tax rate is 7.25% in California, then how much
would you pay in Los Angeles for a pair of shoes that cost $39.00? |
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| Solution: |
($39.00)*(0.0725) = $2.8275. Round to the nearest cent, the
sales tax is $2.83. |
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| Answer: |
You would pay $39.00 plus $2.83 in sales tax for a total of
$41.83. |
| Example 3: |
A roll of plastic electrical tape costs $2.79. If the sales
tax rate is 5%, then how much sales tax is being charge? What is the total
cost for the tape including tax? |
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| Solution: |
($2.79)*(0.05) = $0.1395. Rounded to the nearest cent the
sales tax is $0.14.
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| Answer: |
The sales tax is $0.14 and the total cost is
$2.79 + $0.14 = $2.93. |
| Example 4: |
The price of a new car is $29,990. If the sales tax rate is
6.5%, then how much sales tax is being charged? What is the total cost for
the car including tax? |
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| Solution: |
($29990)*(0.065) = $1949.35.
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| Answer: |
The sales tax is $1949.35 and the total cost is
$29,990.00 + $1949.35 = $31,939.35. |
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As you can see, for small purchases, sales tax can be a nuisance; whereas for
large purchases, sales tax can be a significant amount. Let's look at an example
in which the sales tax rate is unknown.
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| Example 5: |
If your restaurant food was $17.00 and the total bill was
$17.68, then what is the sale tax rate being charged? |
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| Analysis: |
Sales tax is the difference between the amount of the total
bill and the price of the item. If we divide the sales tax by the price of
the item, we get the sales tax rate.
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| Solution: |
$17.68 - $17.00 = $0.68 and ($0.68) ÷
($17.00) = 0.04.
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| Answer: |
The sales tax rate is 4%. |
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Summary: |
Sales tax is a tax on goods and services purchased and is normally a
percentage added to the buyer's cost.
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Exercises
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Directions: Each problem below involves sales tax. Solve each problem below
by entering a dollar amount with cents. Round to the nearest cent when
necessary. Do not enter a comma in your answer. For each exercise below, click
once in the ANSWER BOX, type in your answer and then click ENTER. After you
click ENTER, a message will appear in the RESULTS BOX to indicate whether your
answer is correct or incorrect. To start over, click CLEAR.
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1.
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If the sales tax rate is 7.375% in New York State, then how much
sales tax would you pay in Albany for a $34 pair of pants?
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2.
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If the sales tax rate is 5.25% in New Jersey, then what is the
total price including tax for a $25.00 piece of jewelry bought in
Trenton?
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3.
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Amy bought a dress marked $42 and then paid the store clerk a total
of $43.47. What was the sales tax rate? (Enter your answer as a
percent.)
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4.
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If the sales tax rate is 8.375% in New York City, then how
much sales tax would you pay for a new car in Manhattan that costs
$31,500?
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5.
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If the sales tax rate is 7.25% in California, then how much tax
should a merchant charge in San Francisco for the sale of a $15 scarf?
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Interactive Math Goodies Software
