Question

Waterway Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $42400. If the sales tax rate is 6%, what amount must be remitted to the state for October's sales taxes?

a) $2544
b) $2400
c) It cannot be determined
d) $144

Answer 1

The Waterway Company must remit $2400 to the state for October's sales taxes, calculated by dividing the total receipts by 1.06 to separate the sales revenue and the tax.

Step-by-step explanation:

Waterway Company must remit to the state for October's sales taxes at a rate of 6% is $2400.

To determine the amount of sales taxes that were included in the total receipts, one must first understand that the total receipts include both the sales revenue and the sales tax.

The sales tax is 6% of the actual sales price, so we must divide the total receipts of $42400 by 1.06 (100% + 6% sales tax expressed as a decimal) to find the actual sales revenue. After the calculation, the sales revenue equals $40000, which means the sales tax that needs to be remitted is $42400 minus $40000, equating to $2400. This uses the formula Total Receipts / (1 + Sales Tax Rate) to calculate the sales revenue before tax.