A contractor sells materials to another contractor for $15,000. If the state sales tax rate is 7.5%, how much sales tax must be collected and remitted?
Correct Answer
B) $1,125
Sales tax = $15,000 × 7.5% = $1,125. This amount must be collected from the buyer and remitted to the state
Why This Is the Correct Answer
Option B is correct because sales tax is calculated by multiplying the sale amount by the tax rate. $15,000 × 7.5% = $15,000 × 0.075 = $1,125. This is the amount the selling contractor must collect from the buyer and remit to the state tax authority. Sales tax calculations are straightforward percentage applications of the stated tax rate to the taxable sale amount.
Why the Other Options Are Wrong
Option C: $975
$1,050 results from incorrectly calculating 7% instead of 7.5% ($15,000 × 0.07 = $1,050). This is a common error when misreading the tax rate or confusing it with a rounded percentage.
Option D: $1,050
$1,200 results from calculating 8% instead of 7.5% ($15,000 × 0.08 = $1,200). This error occurs when misreading the tax rate or applying an incorrect percentage from memory.
Memory Technique
Remember 'Sale × State = Send': Sale amount × State tax rate = Send to government. Always convert percentage to decimal (7.5% = 0.075) before multiplying.
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