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McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
Edition 3ISBN: 9780078111068McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
Edition 3ISBN: 9780078111068 Exercise 44
Melanie operates Mel's Bakery in Foxboro, Massachusetts.Mel's retail stores are located in Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island.Mel's also ships specialty breads nationwide upon request.Determine Mel's sales tax collection responsibility and calculate the sales tax liability for Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island , and Texas using the information about each state provided below:
a) The Massachusetts stores earn $500,000 in sales.Massachusetts' sales tax rate is 5 percent; assume it exempts food items.b) The Connecticut retail stores have $400,000 in sales ($300,000 from in-store sales and $100,000 for catering) and $10,000 in delivery charges for catering activities.Connecticut sales tax is 6 percent and excludes food products, but taxes prepared meals (catering).Connecticut also imposes sales tax on delivery charges on taxable sales.
c) Mel's Maine retail store has $250,000 of sales ($200,000 for take-out and $50,000 of in-store sales).Maine has a 5 percent sales tax rate and a 7 percent sales tax on prepared food; it exempts other food purchases.d) The New Hampshire retail stores have $250,000 in sales.New Hampshire is one of five states with no sales tax.However, it has a room and meals tax rate of 8 percent.New Hampshire considers any food or beverage that is served by a restaurant for consumption on or off the restaurant premises to be considered a meal.
e) Mel's Rhode Island retail stores have $300,000 in sales.The Rhode Island sales tax rate is 7 percent and its restaurant surtax is 1 percent.Rhode Island considers Mel's a restaurant because its retail store has seating.f) One of Mel's best customers relocated to Texas, which imposes an 8.5 percent state and local sales tax rate but exempts bakery products.This customer entertains regularly and ordered $5,000 of food items this year.
a) The Massachusetts stores earn $500,000 in sales.Massachusetts' sales tax rate is 5 percent; assume it exempts food items.b) The Connecticut retail stores have $400,000 in sales ($300,000 from in-store sales and $100,000 for catering) and $10,000 in delivery charges for catering activities.Connecticut sales tax is 6 percent and excludes food products, but taxes prepared meals (catering).Connecticut also imposes sales tax on delivery charges on taxable sales.
c) Mel's Maine retail store has $250,000 of sales ($200,000 for take-out and $50,000 of in-store sales).Maine has a 5 percent sales tax rate and a 7 percent sales tax on prepared food; it exempts other food purchases.d) The New Hampshire retail stores have $250,000 in sales.New Hampshire is one of five states with no sales tax.However, it has a room and meals tax rate of 8 percent.New Hampshire considers any food or beverage that is served by a restaurant for consumption on or off the restaurant premises to be considered a meal.
e) Mel's Rhode Island retail stores have $300,000 in sales.The Rhode Island sales tax rate is 7 percent and its restaurant surtax is 1 percent.Rhode Island considers Mel's a restaurant because its retail store has seating.f) One of Mel's best customers relocated to Texas, which imposes an 8.5 percent state and local sales tax rate but exempts bakery products.This customer entertains regularly and ordered $5,000 of food items this year.
Explanation
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a)Food products are exempted from tax in...
McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
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