Excise Taxes: Study Sheet

Business Math Terms

  • Sales Tax is a tax levied on the retail price of products and services which is collected by the retailer and subsequently remitted to the appropriate government agency.
  • Value-Added Tax, or VAT, is a tax levied on products which reflects the estimated value added to the product at each stage of production or distribution. The VAT is ulimately paid by the customer.

Sales Tax

  • The sales tax rate is expressed as a percentage
  • Given the purchase price of a product or service and a sales tax rate:

    Sales Tax = (Purchase Price) x (Sales Tax Rate)

  • Once the tax is computed, it is added to the purchase price to determine the total amount the customer must pay for the product or service

Value-Added Tax

  • The value-added tax rate is expressed as a percentage
  • Given the purchase price of a product and a value-added tax rate:

    Value-Added Tax = (Purchase Price) x (Value-Added Tax Rate)