Question

TR Company conducts business exclusively in State V, which levies a 5 percent 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.

Required:
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

a. Particulars Amount

Value of property purchased in State B A $90,000

Tax rate in State V B 5%

Pre-Credit use tax C (A*B) $4,500

Credit Sales tax paid to State B D ($5,400)

Use tax owed to State V E (C+D) $0

b. Particulars Amount

Value of property purchased in State D A $200,000

Tax rate in State V B 5%

Pre-credit use tax C (A*B) $10,000

Credit Sales tax paid to State D D ($7,000)

Use tax owed to State V E (C+D) $3,000