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Topic: Confusion on adding percentage of cost to that cost.
Replies: 1   Last Post: Jul 12, 2005 8:10 PM

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Kevin Karplus

Posts: 190
Registered: 12/6/04
Re: Confusion on adding percentage of cost to that cost.
Posted: Jul 12, 2005 8:10 PM
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On 2005-07-12, ticbol <> wrote:
> Taxman sees sale is $10.58
> Taxman gets his 5.75% of that, which is $0.61
> Taxman doesn't know---and he never cares---that 5.75% of $10 was added
> to the $10.
> Taxman never cares too if the original $10 were sold at $20. In this
> case, if sales is $20, tax is 5.75% of $20.

Taxes are computed differently in different countries (and even
different states in the US).

In California, the sales tax is expressed as a percentage of the price
charged *before* sales tax is added on and retailers are allowed to
advertise the price without including the taxes. Thus a $1 item
actually costs the customer $1.08 (if you are in a county with an 8%
sales tax rate---the rate varies from place to place in the state).
The retailer gets to keep $1 and has to send the $0.08 to the state.

Other places may well use a different basis for the computation, but
this is not a math question but a tax-law question.
I believe that most states in the US use the pre-tax price as the
basis, but I have not researched it other than in the states I have
lived in (Illinois, Michigan, New York, California).

Kevin Karplus
Professor of Biomolecular Engineering, University of California, Santa Cruz
Undergraduate and Graduate Director, Bioinformatics
(Senior member, IEEE) (Board of Directors, ISCB)
life member (LAB, Adventure Cycling, American Youth Hostels)
Effective Cycling Instructor #218-ck (lapsed)
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