Melanie operates Mel's Bakery in Foxboro, Massachusetts, and has retail stores in Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island. Mel's Bakery also ships specialty breads nationwide upon request.Determine Mel's Bakery's sales tax collection responsibility and calculate the sales tax liability for Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island, and Texas, based on the following information:Note: Leave no answer blank. Enter zero if applicable.Required:The Massachusetts stores have $620,000 in sales. Massachusetts's sales tax rate is 5 percent; assume it exempts food items.The Connecticut retail stores have $496,000 in sales ($360,000 from in-store sales and $136,000 from catering) and $22,000 in delivery charges for catering activities. Connecticut sales tax is 6 percent and excludes food products but taxes prepared meals (catering). Connecticut also imposes sales tax on delivery charges on taxable sales.Mel's Bakery's Maine retail store has $346,000 of sales ($272,000 for take-out and $74,000 of in-store sales). Maine has a 5 percent sales tax rate and a 7 percent sales tax rate on prepared food; it exempts other food purchases such as take-out purchases.

Sales Tax Liability=Sales Amount×Tax RatePart 1: Massachusetts Sales Tax Liability=$0 Since the sales are of exempt food items the sales tax liability is $0.Part 2: Connecticut Sales Tax Liability=Catering Sales+Delivery Charges×Tax Rate=$136,000+$22,000×6%=$9,480Part 3: Maine Sales Tax Liability=In-store Sales×Tax Rate=$74,000×7%=$5,180

Answered: Melanie operates Mel's Bakery in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Massachusetts stores have $620,000 in sales. Massachusetts's sales tax rate is 5 percent; assume it exempts food items.
The Connecticut retail stores have $496,000 in sales ($360,000 from in-store sales and $136,000 from catering) and $22,000 in delivery charges for catering activities. Connecticut sales tax is 6 percent and excludes food products but taxes prepared meals (catering). Connecticut also imposes sales tax on delivery charges on taxable sales.
Mel's Bakery's Maine retail store has $346,000 of sales ($272,000 for take-out and $74,000 of in-store sales). Maine has a 5 percent sales tax rate and a 7 percent sales tax rate on prepared food; it exempts other food purchases such as take-out purchases.

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