Question

Smed Problem 01-04 (Algo) (LO 1-2) This year, State A raised revenues by increasing its general sales tax rate from 5 percent to 6 percent. Because of the increase the volume of taxable sales declined from $822 million to $737 million. In contrast, State Z raised revenues from its 5 percent sales tax by expanding the tax base to include certain retail services. The volume of services subject to tax was $139 million Required: a. Compute the additional revenue raised by State A b. Compute the additional revenue raised by State Z. Complete this question by entering your answers in the tabs below. Required A Required B Compute the additional revenue raised by State A. (Enter your answers in dollars not in millions of dollars.) Additional revenuo Required) (Required A

Answer 1

Additional Tax Revenue Calculations

Amount Question-a Particulars Before increase in Tax Rate Taxable Sales Tax Rate Tax Revenue (A) $82,20,00,000 5% $4,11,00,000 After increase in Tax Rate Taxable Sales Tax Rate Tax Revenue (B) $73,70,00,000 6% $4,42,20,000 Additional Tax Revenue raised by State A (B-A) $31,20,000 Question-b Particulars Increase in Volume of Service Tax Rate Additional Tax Revenue raised by State Z Amount $13,90,00,000 5% $69,50,000