McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 17

Kai operates the Surf Shop in Laie, Hawaii. The Surf Shop designs, manufacturers and customizes surf boards. Hawaii has a 4 percent excise tax that is technically paid by the seller. However the state also allows "tax on tax" to be charged, which effectively means a customer is billed 4.166% of the sales price. Determine the sales and use tax liability that the Surf Shop must collect and remit or that the customer must pay for each of the following orders:
a) Bronco, a Utah customer, places an internet order for a $1,000 board that will be shipped to Provo, Utah where the local sales tax rate is 6.25 percent.
b) Norm, a California resident, comes to the retail shop on vacation and has a $2,000 custom board made. Norm uses the board on vacation and then has the Surf Shop ship the board to Los Angeles, California where the sales tax rate is 8.5 percent.
c) Jim, an Ohio resident, places an order for a $2,000 custom board while at the end of his vacation. Upon completion the board will be shipped to Columbus, Ohio where the sales tax rate is 7 percent.
d) Bo, a Nebraska resident, sends his current surf board to the Surf Shop for a custom paint job. The customization services come to $800. The board is shipped to Lincoln, Nebraska where the sales tax rate is 7 percent.