The problems on profit loss involving sales tax are explained in detail here. Therefore the students of 10th grade who are looking to learn the concept of profit loss involving tax can access this page and practice the problems. It is very easy to find the profit percentage or loss percentage only if you know the formulas on it. Here we provide the formulas on sales tax profit and loss involving tax, utilize them, and try to solve the problems.
Refer to:
Profit Loss Involving Tax – Definition
Profit Loss Involving Tax can also be called business income or loss. The gross profit is equal to the difference between sales and the cost of goods sold. In order to calculate the profit and loss involving tax, the company must add back the cost of goods sold and then multiply it with the rate of tax.
Profit Loss Involving Tax Examples
Example 1.
A shopkeeper buys a home theater at a rebate of 20% on the printed price. He spends $ 20 on transportation of the home theater player. After changing a sales tax 6% on the printed price, he sells the DVD player at $530. Find his profit percentage.
Solution:
Let the printed price be P.
Then, the cost price = P – 25% of P
= P – 25P/100
= 75P/100
Actual cost price including transportation cost = 25P/100 + $ 25.
The sales tax = 8% of P = 8P/100 = 4P/50
Therefore, the selling price including sales tax = P + 4P/50
According to the problem,
P + 4P/50 = 54P/50 = $ 630
54P/50 = $ 630
Therefore, P = $ 601.8
Therefore, the actual cost price = 25P/100 + $ 25 = 25×$601.8/100 + $ 225 = $ 175.45.
Therefore, profit = printed price – actual cost price = $ 601.8 – $ 4175.45 = $ 426.35
Therefore, profit percentage = $426.35/$175.45 × 100% = 243.003
Therefore the profit percentage is 243.003
Example 2.
A seller buys a Television for $ 2500 and marks up its price. A customer buys the Television for $ 3,300 which includes a sales tax of 10% on the marked up price.
(i) Find the mark-up percentage on the price of the Television.
(ii) Find his profit percentage.
Solution:
Let the marked up price be P. Then, the sales tax = 12% of P = P/12.
Therefore, selling price = P + P/12
According to the problem, = $ 3000
P ∙ 13/12 = $ 3000
Therefore, P = $ 2769.2.
Therefore, $ 2600 is marked up to $ 2769.2
Therefore, mark-up percentage = $2769.2 −$2600/2600 × 100
= 169.2 /2600 × 100
= 6.50%
Now, the profit = marked up price – cost price = $ 2769.2 – $ 2600 = $ 169.2
Therefore, profit percentage = $169.2/$2600 × 100% = 6.50
Example 3.
Sithara purchases biscuits costing Rs 148 on which the rate of sales tax is 4%. She also purchases some cosmetic goods costing Rs 344 on which the rate of sales tax is 7%. Find the total amount to be paid by Sithara.
Solution:
Sale price of biscuits = Rs 148
Rate of sales tax on biscuits= 4%
Amount paid for biscuits= Rs 148 + 4% of Rs 148
= Rs 148 + 4/100 × 148
= Rs 148 + Rs 5.92
= Rs 153.92
Sale price of cosmetic goods = Rs 344
Rate of sales tax= 7%
Amount paid for cosmetic goods = Rs 344 + 7% of Rs 344
= Rs 344 + 7/100 × 344
= Rs 344 + Rs 24.08
= Rs 368.08
Total amount paid by Sithara = Rs 153.92 + Rs 368.08
= Rs 522
Example 4.
Rajat purchases a wrist-watch costing Rs 540. The rate of sales tax is 8%. Find the total amount paid by Rajat for the watch.
Solution:
Sale price of watch = Rs 540
Rate of sales tax = 8%
Total amount paid by Rajat = Rs 540 + 8% of Rs 540
= Rs 540 + 8/100 × 540
= Rs 540 + ₹ 43.20
= Rs 583.20
Therefore the amount paid by Rajat = 583.20
FAQs on Profit Loss Involving Tax
1. What is the formula for profit after tax?
To calculate net operating profit after tax is net income plus net after-tax interest expense multiplied by 1, minus the tax rate.
2. How do you calculate sales tax on profit and loss?
To calculate sales tax on profit and loss, the company or organization must add back the cost of goods sold, then multiply by the tax rate.
3. Does sales tax go on profit and loss?
Sales tax is a responsibility and as such transactions using that responsibility, the account doesn’t appear on your Profit and loss because it is neither income nor an expense.