In: Accounting
Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The shop sells, manufactures, and customizes tennis racquets for serious amateurs. Virginia has a 5 percent sales tax. Tennessee has a 4 percent sales tax. Determine the sales and use tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store?
EXPLANATIONS
Sales price of any product would decide the sales tax liability
that the seller must collect from its customers.
Such sales tax is decided by the tax authorities and the seller
must collect the sales tax at a prescribed rate.
In the given case :
Blacksburg, Virginia. The shop sells, manufactures, and customizes tennis racquets for serious amateurs. Virginia has a 5 percent sales tax. Tennessee has a 4 percent sales tax.
The sales and tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store is :
The sales and tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store is :
Sales tax on racquet would be collected at the rate of 5% (i.e tax rate of Virginia), and it would make no affect on tax rate if Tennessee resident that purchases the merchandise in the Virginia retail store.
Total tax liability = $25 ($500*5%)
Total Sales price = $525 ($500+$25)