Calculating sales tax
About this video
The video works through a sales tax problem: Virginia's base rate is 5.3% and York County adds 1.7%, for 7% total, but food for home consumption and essential hygiene items are taxed at a reduced 1%. Rita's $6 of groceries (bread, milk, chips) are taxed at 1% ($0.06) and her $6 of other items like batteries at 7% ($0.42), so her total bill is $12.48.
You'll be able to
- decide which items are taxed at a reduced rate and which at the full rate.
- combine state and local sales tax rates.
- calculate a total bill including sales tax.
Key words
- sales tax
- A tax added to the price of things you buy.
- base rate
- The standard state sales tax rate before any local tax is added.
- local sales tax
- Extra sales tax added by a county or city on top of the state rate.
- reduced rate
- A lower tax rate for essentials, like 1% on food for home consumption in Virginia.
Transcript
- [Narrator] We're told the base sales tax rate for the state of Virginia is 5.3%. York County, Virginia has an additional sales tax of 1.7%. In all of Virginia, food for home consumption and certain essential personal hygiene items are taxed at a total reduced rate of 1%.
So I guess that's including the state and the local tax together is at 1%. Rita buys the following items at the grocery store and they list it here. What is Rita's total grocery bill with tax included? So pause this video and try to work through that on your own and then we can do this together.
All right, now, to work through this together, we have to think about how much each of these are going to be taxed at. So bread, I believe, will qualify for home consumption. What they're trying to do with that reduced tax rate is things that you need, groceries, things like that, that aren't luxuries, they should be taxed at a lower rate.
While if you were to, say, go out to a restaurant, things that you don't have to do, but you like to do every now and then, that might be taxed at a higher rate. So bread, this is going to be 1%. Milk is also going to be 1% for the same reason. Chips would also 1%, assuming that's also for home consumption.
We could argue whether that is really essential or not. But we'll go with chips for now at 1%. And then batteries, well, that doesn't look like home consumption, in terms of groceries. And then we also have, and that also is not an essential personal hygiene item, so I will tax that at the higher rate.
So that's 5.3% for the state, plus 1.7%, which is equal to a 7% tax rate. So let's see, if we tax this over here at 1%. If we add all of this up, $2 plus 1.50 is 3.50, and then 3.50 plus 2.50, this is $6, plus 1% of $6. So that's plus $0.06, that's the tax part.
And then over here, we have $6 plus the 7%. The 7%, 7% of $6 is $0.42. $0.42. So if we were to add everything together, we have $6, $6, let me just add, it's 6 plus 6 plus 0.06 plus 0.42. Well, this is going to be 0.48. This is $12. So this is all going to be the total bill, they want our total grocery bill with tax included, is going to be $12.48 cents.
And we are done.
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