1. Hill Farms Wheat collected €100 of VAT and remitted this amount to the tax authority; it did not have a net cash outlay for these taxes. 2. Sunshine Baking collected €200 of VAT but only remitted €100 to the tax authority because it received credit for the €100 VAT that it paid to Hill Farms Wheat; it did not have a net cash outlay for these taxes. 3. Halo Supermarket collected €240 of VAT but only remitted €40 to the tax authority because it received credit for the €200 of VAT it paid to Sunshine Baking; it did not have a net cash outlay for these taxes. In summary, the total VAT collected and remitted by the companies in the supply chain is as follows. Hill Farms Wheat Sunshine Baking Halo Supermarket Totals VAT Collected €100 200 240 €540 VAT Remitted €100 100 40 €240 VAT Credited VAT Owed € 0 €0 100 0 200 0 €300 €0 So who actually pays the VAT? It is the consumers who bear the €240 VAT cost as part of their purchase price, not the companies that produced and distributed the bread.
1. Hill Farms Wheat collected €100 of VAT and remitted this amount to the tax authority; it did not have a net cash outlay for these taxes. 2. Sunshine Baking collected €200 of VAT but only remitted €100 to the tax authority because it received credit for the €100 VAT that it paid to Hill Farms Wheat; it did not have a net cash outlay for these taxes. 3. Halo Supermarket collected €240 of VAT but only remitted €40 to the tax authority because it received credit for the €200 of VAT it paid to Sunshine Baking; it did not have a net cash outlay for these taxes. In summary, the total VAT collected and remitted by the companies in the supply chain is as follows. Hill Farms Wheat Sunshine Baking Halo Supermarket Totals VAT Collected €100 200 240 €540 VAT Remitted €100 100 40 €240 VAT Credited VAT Owed € 0 €0 100 0 200 0 €300 €0 So who actually pays the VAT? It is the consumers who bear the €240 VAT cost as part of their purchase price, not the companies that produced and distributed the bread.
Chapter16: Multistate Corporate Taxation
Section: Chapter Questions
Problem 36P
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Transcribed Image Text:1. Hill Farms Wheat collected €100 of VAT and remitted this amount to the tax authority; it did not have a net
cash outlay for these taxes.
2. Sunshine Baking collected €200 of VAT but only remitted €100 to the tax authority because it received
credit for the €100 VAT that it paid to Hill Farms Wheat; it did not have a net cash outlay for these taxes.
3. Halo Supermarket collected €240 of VAT but only remitted €40 to the tax authority because it received
credit for the €200 of VAT it paid to Sunshine Baking; it did not have a net cash outlay for these taxes.
In summary, the total VAT collected and remitted by the companies in the supply chain is as follows.
Hill Farms Wheat
Sunshine Baking
Halo Supermarket
Totals
VAT Collected
€100
200
240
€540
VAT Remitted
€100
100
40
€240
VAT Credited
VAT Owed
€ 0
€0
100
0
200
0
€300
€0
So who actually pays the VAT? It is the consumers who bear the €240 VAT cost as part of their purchase price,
not the companies that produced and distributed the bread.
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