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Income Consumption House 1: $150,000 $45,000 House 2: $80,000 $40,000 House 3: $30,000 $21,000 There is a retail sales tax of 7% what would the sales tax liability be for each house
Income Consumption
House 1: $150,000 $45,000
House 2: $80,000 $40,000
House 3: $30,000 $21,000
There is a retail sales tax of 7% what would the sales tax liability be for each house. What is the average tax rate for each house?
Expert Solution
Computation of the sales tax liability for each house:-
House 1 ;
Sales tax liability = Consumption * Retail sales tax
= $45,000 * 7%
= $3,150
House 2 ;
Sales tax liability = Consumption * Retail sales tax
= $40,000 * 7%
= $2,800
House 3 ;
Sales tax liability = Consumption * Retail sales tax
= $21,000 * 7%
= $1,470
Computation of the average tax rate for each house:-
House 1;
Average tax rate = Sales tax liability / Income
= $3,150 / $150,000
= 2.10%
House 2;
Average tax rate = Sales tax liability / Income
= $2,800 / $80,000
= 3.50%
House 3;
Average tax rate = Sales tax liability / Income
= $1,470 / $30,000
= 4.90%
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