Sales Taxes, Property Taxes, and Business Taxation

Sales tax is computed on the taxable selling amount, not automatically on every dollar of a purchase. A tax rate written as a percent must be divided by 100 before multiplication. The rules in this section are hypothetical teaching rules, not statements of Philadelphia or any other jurisdiction's law.

First classify the items using the stated assumptions. Add taxable items, apply any eligible discount, and then compute tax on the resulting taxable subtotal. In these exercises, round the total tax once to the nearest cent, rather than rounding tax separately on each item. Actual invoicing rules can differ.

The customer's total includes both the taxable and exempt amounts plus tax. A retailer generally treats tax collected for the government as a liability to remit, not as sales revenue. The money passing through the cash drawer is therefore not all business income.

If a fully taxable price already includes tax, undo multiplication by dividing by one plus the decimal tax rate. Simply subtracting the tax percent of the total removes too much. Reverse-tax calculations assume one uniform rate and may have cent-level ambiguities; the examples are chosen to reconcile after rounding.

Property taxes commonly use an assessed value, which may differ from market value. In this model, multiply market value by the stated assessment ratio. The model does not imply that any actual jurisdiction assesses property in exactly this way.

A mill means one dollar of tax per thousand dollars of taxable assessed value. Thus 20 mills is 20 ÷ 1,000 = 0.020, or 2%, not 20%. Expressing rates in different units is a frequent source of large errors.

For the problems here, subtract the exemption from assessed value before applying the millage rate. Taxable assessed value cannot fall below zero. An exemption reduces the tax base; a tax credit instead reduces the calculated tax bill. They are not interchangeable.

Dividing an annual bill by 12 creates a monthly budget estimate, not necessarily the actual payment schedule. Extra fees, reassessments, due dates, appeals, and relief programs are outside this simplified model. Always verify the applicable rules before using a real estimate, and round money to cents.

Gross revenue is not the amount a business necessarily pays income tax on. In the simplified model, subtract allowed expenses to obtain taxable profit. Actual law can treat depreciation, losses, deductions, and entity types differently; the invented rules here are only arithmetic practice.

A marginal rate applies only to the slice of taxable income inside that bracket. Moving into a higher bracket does not cause all earlier income to be taxed at the higher rate. Add the tax on each slice to find total tax before credits.

A deduction reduces taxable income, while a credit reduces calculated tax. In this lesson, credits are nonrefundable: they cannot reduce tax below zero. The effective tax rate is final tax after credits divided by taxable profit, and it can be lower than the top marginal rate.

Estimated payments and withholding are prepayments, not extra deductions from profit. Subtract them from final tax to determine the remaining balance; an excess is a possible refund in this model. Quarterly installments here mean four equal planning payments, not a claim about real deadlines, penalties, or safe-harbor requirements. Round money to cents.