Question

Heliot Company operates its business in State H, which levies a 6 percent sales and use tax. This year, Heliot purchased a $600,000 item of tangible property in State K and paid $18,000 sales tax to the state. It also purchased a $750,000 item of tangible property in State L and paid $48,750 sales tax to the state. Firm H transported both items of property into State H for use in its business. a. Compute the use tax that Heliot owes to State H for the property purchased in State K. b. Compute the use tax that Heliot owes to State H for the property purchased in State L.

Answer 1

Answer:

a) The total Use tax Heliot Owes State H for Property in K            $18,000

b)The total Use tax Heliot Owes State H  for Property in L                     $0

Explanation:

Part A: Use of Tax Heliot owes to State H for Property Purchased

The value of the property in State H that Heliot Purchased        $600,000

Tax rate applicable in State H                                                          6%

tax for Pre-credit use (0.06 x 600,000)                                           $36,000

Subtract The sales tax paid by Heliot to State K                            ($18,000)

The total Use tax Heliot Owes State H                                            $18,000

Part B: Use tax Heliot owes state H for property purchased in State L

The value of the property in State L that Heliot Purchased        $750,000

Tax rate applicable in State H                                                          6%

tax for Pre-credit use (0.06 x 600,000)                                           $45,000

Subtract The sales tax paid by Heliot to State L                            ($48,7500)

The total Use tax Heliot Owes State H                                            $0

It is 0 because the sales tax paid to State L is higher than the pre-credit use tax expected by State H.