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    Sales Tax on a Vehicle Purchase

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    1.) Sales Tax: Sales tax on the purchase of a vehicle is calculated on the net purchase price (which is the total purchase price minus the amount allowed by a dealer for any trade-in). The rate of tax for residents in Denver, CO is as follows:

    ?Colorado state tax: 2.90%
    ?Regional transportation district (RTD) tax: 1.20%
    ?Denver city tax: 3.62%

    Using the information above, answer the following:

    What is the total sales tax to be paid in 2002 on the purchase of a 2002 passenger vehicle with a sales price of $17,000 and a $2,000 trade-in allowance?

    How would the sales tax be distributed between the state, the RTD, and the city?

    2.) Property Tax: Which job should you take? After completing your degree, you have a choice between 2 jobs. Suppose that you do not have a preference in location and have been given the following offers:

    ?The first position is in Pennsylvania, earning $50,000 a year. You found a starter duplex that you can purchase with the assessed value of $75,000. Property taxes average 2.975% of the purchase price. The state sales tax is 6% on purchases, but this does not apply to food and clothing. The state income tax is 3%.
    ?The second offer is in Maryland. You would earn $65,000, with a starter duplex assessed at $135,000. In Maryland, property taxes are 2.4% of the purchase price of the property. The sales taxes are 1% higher than in Pennsylvania, and it also applies to food and clothing. Maryland's state income tax is 1.5% higher than Pennsylvania's.

    You estimate your annual purchases are approximately $18,000, plus an additional $6,000 in food and clothing.

    ?What is the difference in cost of living between the 2 locations based on the differences in sales tax, income tax, and property tax?
    ?What factors will you consider when deciding which job to choose?
    ?What would be the better offer for you? Why? Explain in detail.

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    Solution Summary

    The sales tax on a vehicle purchase is determined.