Answers Chapter 1 Homework-Introduction Essay

1206 Words Jan 3rd, 2013 5 Pages
CHAPTER 1: EXPLORING THE TAX ENVIRONMENT

DISCUSSION PROBLEMS

1) CUSTER COUNTRY IS CONSIDERING RAISING REVENUES BY IMPOSING A $25 FEE ON COUPLES WHO OBTAIN A MARRIAGE LICENSE WITHIN THE JURISDICTION. DOES THIS FEE MEET THE DEFINITION OF A TRANSACTION-BASED TAX?

NO, IT MORE CLOSELY RESEMBLES A FEE FOR A GOVERNMENT SERVICE. THE PAYMENT ENTITLES THE PAYER TO A SPECIFIC BENEFIT (THE RIGHT TO MARRY UNDER THE LAW).

2) A LOCAL GOVERNMENT RECENTLY IMPOSED A NEW 2 PERCENT TAX ON THE GROSS RECEIPTS OF BUSINESSES OPERATING WITHIN ITS JURISDICTION. THE XYZ COMPANY, WHICH MANUFACTURES SOAP AND OTHER TOILETRIES, RESPONDED TO THE TAX BY REDUCING THE SIZE OF ITS BARS OF SOAP AND PURCHASING A CHEAPER GRADE OF INGREDIENTS. BY MAKING THESE
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2) 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?

MR. AND MRS. CS ARE NOT REQUIRED TO PAY SALES TAX ON THE PURCHASE OF INVENTORY GOODS BECAUSE THEY ARE NOT THE FINAL CONSUMERS OF THE GOODS. THE HARDWARE STORE’S RETAIL CUSTOMERS MUST PAY THE SALES TAX WHEN THEY PURCHASE GOODS.

B) HOW CAN MR. AND MRS. CS MINIMIZE THE PERSONAL PROPERTY TAX BURDEN ON THEIR BUSINESS BY CONTROLLING THE TIMING OF THEIR INVENTORY PURCHASES?

MR. AND MRS. CS SHOULD TIME THEIR PURCHASES TO MINIMIZE THEIR INVENTORY ON HAND AS OF DECEMBER 31 OF EACH YEAR, THEREBY MINIMIZING BOOK VALUE ON WHICH THE PERSONAL PROPERTY TAX IS BASED.

3) MRS. DK, A RESIDENT OF PENNSYLVANIA, TRAVELED TO DELAWARE TO PURCHASE AN OIL PAINTING FROM A LOCAL ARTIST. THE COST OF THE PAINTING WAS $9,400. PENNSYLVANIA HAS A 7 PERCENT SALES AND USE TAX, WHILE DELAWARE HAS NO SALES AND USE TAX.

A) HOW MUCH PENNSYLVANIA USE TAX DOES MRS.