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Calculation of Tax Deduction
When Tax Has Been Separately Charged and Collected
In the following example, the taxpayer is a retailer who sells an item for $100.00 plus
the current combined tax rate of 8.10% (City 1.8%, County .70% and State 5.6%):
| Sales Price |
$100.00 |
| Sales Price X Tax Rate (8.10%) = Tax Due |
8.10 |
| Sales Price + Tax Due = Gross Receipts |
$108.10 |
Since the tax was separately charged and collected from the customer, the taxpayer may
deduct the taxes collected from the gross receipts when reporting and paying taxes:
| Gross Receipts |
$108.10 |
| Less Actual Tax Collected (Deduction Code F) |
8.10 |
| Taxable Receipts |
$100.00 |
| Tax Due State & County $100 X .063 = |
$ 6.30 |
| Tax Due City $100 X .018 = |
1.80 |
| Total Tax Due |
$ 8.10 |
Sample Tax Report Form
| Activity Code |
Gross Receipts |
Deduction Code |
Deduction |
Net Taxable Amount |
City Tax Rate |
Tax Due |
| 17 (Retail) |
108.10 |
F (Sales Tax Collected) |
8.10 |
100.00 |
1.8% |
1.80 |
When Tax Has Not Been Separately Charged and Collected
(Factoring of Tax)
Factoring is permitted when a business does not separately charge and collect
tax from its customers. Example: XYZ Television Store sells you a
TV for $100.00 including tax. This means that XYZ Television Store included the tax
as part of the sale but chose not to show the tax collected as a separate amount on the
sales receipt.
| Sales Price including Tax/Gross Receipts |
$100.00 |
Since the taxpayer did not separately charge and collect tax from the customer but
included it as part of the sales price, the taxpayer is allowed to "factor" the
tax collected out of the gross receipts to determine taxable sales:
| Gross Receipts times the Factored Rate = Total Taxes Due |
$100.00 x 0.074931 = $7.49 |
| Gross Receipts |
$100.00 |
| Less Taxes (Deduction Code F) |
7.49 |
| Taxable Sales |
$ 92.51 |
| Tax Due State & County $92.51 X .0630 = |
$ 5.82 |
| Tax Due City $92.51 X .018 = |
1.67 |
| Total Tax Due |
$ 7.49 |
Sample Tax Report Form
| Activity Code |
Gross Receipts |
Deduction Code |
Deduction |
Net Taxable Amount |
City Tax Rate |
Tax Due |
| 17 (Retail) |
100.00 |
F (Sales Tax Collected) |
7.49 |
92.51 |
1.8% |
1.67 |
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