Page 51 - Calculating Agriculture Cover 20191124 STUDENT - A

CH 4] Calculating Agriculture 4-13

Adding the calculated sales tax and the luxury tax to the retail purchase equals the total
retail payment. In the above example this is:

Example: Using the Luxury tax rate of 10%, and a sales tax of 8% calculate the luxury
tax, sales tax, and total cost on a retail purchase is $150,000.

Solution A: Sales x Luxury Tax Rate = Luxury Tax
$150,000 x 10% = $15,000 luxury tax
Sales x Sales Tax Rate = Sales Tax
$150,000 x 0.08 = $12,000 sales tax
Sales + Sales Tax + Luxury Tax = Total Cost
$150,000 + $12,000 + $15,000 = $177,000
OR

Solution B: Total Sales x (1 + Sales Tax Rate + Luxury Tax Rate) = Total Retail Sales.
$150,000 x (1 + 0.08 + 0.10) = Total Retail Sale
$150,000 x (1.18) = $177,000

The sum total of all sales tax and luxury tax collected is remitted to the states treasurer or
Internal Revenue Service (IRS) as prescribed in the affecting law(s). Remember that it is the
customer who pays this tax, the merchant only acts as the collecting agent on behalf of the
government.

Excise taxes
An excise tax is called an indirect tax on the sale of a particular good or service such as 4
fuel, tobacco and alcohol. Indirect means the tax is not directly paid by an individual
consumer. Instead, the Internal Revenue Service (IRS) levies the tax on the producer or
merchant, who passes that cost onto the consumer by including it in the product's
price. The excise tax is paid to the federal treasury before the product actually leaves the
production facility. Liquors and cigarettes each have a stamp attached to the item which is
evidence that the tax has been paid.
Excise taxes on gasoline and diesel fuel are listed on the pumps and have been paid by
the refinery before it leaves the production facility. These taxes are levied by both the federal
government and states government. Anyone using fuel products can see the amount of tax on
the pumps that dispenses the fuel into your tanks. The business owner pays that fuel excise
tax as it is delivered and that tax is passed onto the consumer with each gallon pumped in
higher pump prices.
Thus to raise taxes on the Alcohol, cigarettes and fuel is to increase their retail price and
to reduce the amount they are used by the public. In this context, excise taxes are sometimes
known as "sin taxes."
In New York the excise tax on a pack of cigarettes is $5.85. When the cost per pack is $10
then the total price to the consumer is $15.85.
When purchasing Beer, the tax paid by the brewer is $0.5645 for every gallon. If the
brewers produces 16,000,000 gallons in December then they are required to pay to the Federal
Treasury ($0.5645 x 16,000,000 =) $9,032,000 before anything is loaded onto their trucks for
delivery to their retailers.
For wines that are 14% or less in alcohol content the federal excise tax is $1.07 per gallon.
The vintners of the United States produce in excess of 800,000,000 gallons of wine each year
and this number is rising. In one month they will pay the wine excise tax that could be
(800,000,000/12 x $1.07 =) $71,333,333.33 before the wine is loaded and sent to the retail
outlets.
The highest Distilled Spirits Excise Tax Rate (hard liquor such as Whiskey) is in the state
of Washington at $35.22 per gallon. In the United States, there is sold annually in excess of
500,000,000 gallons of spirits. Before these gallons leave the distillers production plant the tax
on those spirits is paid and collected by the federal treasury. In one month this would amount
to (500,000,000/12 x $35.22 =) $1,467,500,000 (One billion, four-hundred sixty seven million,
five hundred thousand dollars (rounded). Again, This tax is paid before the spirits leaves the
distillers premises.

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