Question

TR Company conducts business exclusively in State V, which levies a 5% sales and use tax on goods purchased or consumed in state. This year, TR bought equipment in State B. The cost of the equipment was $90,000 and TR paid $5,400 sales tax to State B. TR also bought machinery in State D. The cost of the machinery was $200,000 and TR paid $7,000 sales tax to State D.

a. How much use tax does TR Company owe to State V with respect to the equipment bought in State B?

b. How much use tax does TR Company owe to State V with respect to the machinery bought in State D?

Answer 1

Part A

Value of property purchased in State B (a)	90000
Use tax rate in State V (b)	5%
Pre-credit use tax (D) = (a)x(b)	4500
Credit Sales tax paid to State B (E)	(5400)
Use tax owed to State V (F)=(D) +(E)	0

Part B

Value of property purchased in State D (a)	200000
Use tax rate in State V (b)	5%
Pre-credit use tax (D) = (a)x(b)	10000
Credit Sales tax paid to State D (E)	(7000)
Use tax owed to State V (F)=(D) +(E)	$3000