Guido Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $25,200. If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?
A) $1,200
B) $1,260
C) $60
D) It cannot be determined.

Question

Quizplus · Accepted Answer

The total receipts include both the sales and the sales tax. To find the sales tax amount, we first find the total sales before tax. If the tax rate is 5%, then we consider the total receipts to be 105% of the original sales (100% original sales + 5% sales tax). To find the original sales amount, we divide the total receipts by 1.05 (100% + 5% = 105%, or 1.05 in decimal form). $25,200 / 1.05 = $24,000. The sales tax is the difference between the total receipts and the sales before tax, which is $25,200 - $24,000 = $1,200.

Guido Company Does Not Ring Up Sales Taxes Separately on the Cash