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Financial Terms | |
Sales Tax |
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Definition of Sales TaxSales TaxA tax levied as a percentage of retail sales.
Related Terms:Indirect Taxestaxes paid by consumers when they buy goods and services. A sales tax is an example. After-tax profit marginThe ratio of net income to net sales. After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Average tax ratetaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Before-tax profit marginThe ratio of net income before taxes to net sales. ![]() Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering Cash flow after interest and taxesNet income plus depreciation. Conditional sales contractsSimilar to equipment trust certificates except that the lender is either the Contingent deferred sales charge (CDSC)The formal name for the load of a back-end load fund. Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Corporate taxable equivalentRate of return required on a par bond to produce the same after-tax yield to Cost of salesThe manufacture or purchase price of goods sold in a period or the cost of providing a service. Current Income Tax ExpenseThat portion of the total income tax provision that is based on Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. ![]() Days' sales in inventory ratioThe average number of days' worth of sales that is held in inventory. Days' sales outstandingAverage collection period. Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Deferred Tax LiabilityFuture tax obligation that results from the origination of a temporary Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. depreciation tax shieldReduction in taxes attributable to the depreciation allowance. Domestic International Sales Corporation (DISC)A U.S. corporation that receives a tax incentive for Double-tax agreementAgreement between two countries that taxes paid abroad can be offset against earnings before interest and income tax (EBIT)A measure of profit that ![]() Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working EBDDT - Earnings before depreciation and deferred taxesThis measure is used principally by Effective Tax RateThe total tax provision divided by pretax book income from continuing Electronic Federal Tax Payment Systems (EFTPS)An electronic funds transfer system used by businesses to remit taxes to the government. Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Federal Unemployment Tax Act (FUTA)A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a Foreign Sales Corporation (FSC)A special type of corporation created by the tax Reform Act of 1984 that Foreign tax creditHome country credit against domestic income tax for foreign taxes paid on foreign Gross salesThe total sales recorded prior to sales discounts and returns. Imputation tax systemArrangement by which investors who receive a dividend also receive a tax credit for INCOME TAXWhat the business paid to the IRS. Income taxA government tax on the income earned by an individual or corporation. Income Tax ExpenseSee income tax provision. Income Tax ProvisionThe expense deduction from pretax book income reported on the Inflation TaxThe loss in purchasing power due to inflation eroding the real value of financial assets such as cash. Interest equalization taxtax on foreign investment by residents of the U.S. which was abolished in 1974. Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. interest tax shieldtax savings resulting from deductibility of interest payments. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Limited-tax general obligation bondA general obligation bond that is limited as to revenue sources. Margin Tax RateThe tax rate applicable to the last unit of income. Marginal tax rateThe tax rate that would have to be paid on any additional dollars of taxable income earned. marginal tax rateAdditional taxes owed per dollar of additional income. Marginal Tax RatePercent of an increase in income paid in tax. Net salesTotal revenue, less the cost of sales returns, allowances, and discounts. NET SALES (revenue)The amount sold after customers’ returns, sales discounts, and other allowances are taken away from NUMBER OF DAYS SALES IN RECEIVABLES(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet. Payroll tax expenseThe amount of tax associated with salaries that an employer pays to governments (federal, state, and local). Payroll taxes payableThe amount of payroll taxes owed to the various governments at the end of a period. percentage of sales modelsPlanning model in which sales forecasts are the driving variables and most other variables are Personal tax view (of capital structure)The argument that the difference in personal tax rates between Price/sales ratio (PS Ratio)Determined by dividing current stock price by revenue per share (adjusted for stock splits). Profit before interest and taxes (PBIT)See EBIT. Progressive TaxA tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax. Progressive tax systemA tax system wherein the average tax rate increases for some increases in income but Proportional TaxA tax taking the same percentage of income regardless of the level of income. RATIO OF NET INCOME TO NET SALESA ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula: RATIO OF NET SALES TO NET INCOMEA ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way: Regressive TaxA tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax. return on salesThis ratio equals net income divided by sales revenue. Roth IRA. An IRA account whose earnings are not taxable at all under certaincircumstances. SalesAmounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue. Sales allowanceA reduction in a price that is allowed by the seller, due to a problem Sales chargeThe fee charged by a mutual fund when purchasing shares, usually payable as a commission to Sales discountA reduction in the price of a product or service that is offered by the Sales discountsA contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales. Sales forecastA key input to a firm's financial planning process. External sales forecasts are based on Sales journalA journal used to record the transactions that result in a credit to sales. Sales mixThe mix of product/services offered by the business, each of which may be aimed at different customers, with each product/service having different prices and costs. sales mixthe relative combination of quantities of sales of the various products that make up the total sales of a company Sales returnsA contra account that offsets revenue. It represents the amount of sales made that were later returned. Sales Revenue Revenue recognized from the sales of products as opposed to the provision ofservices. Sales-type leaseAn arrangement whereby a firm leases its own equipment, such as IBM leasing its own Sales-type LeaseLease accounting used by a manufacturer who is also a lessor. Up-front gross Sales value at split-offA cost allocation methodology that allocates joint costs to joint sales value at split-off allocationa method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products Short-term tax exemptsShort-term securities issued by states, municipalities, local housing agencies, and Split-rate tax systemA tax system that taxes retained earnings at a higher rate than earnings that are State Disability TaxA tax charged by selected states to maintain a disability insurance Statutory Tax RateThe income tax rate that is stated in income tax law. It is applied to taxable TANs (tax anticipation notes)tax anticipation notes issued by states or municipalities to finance current Tax anticipation bills (TABs)Special bills that the Treasury occasionally issues that mature on corporate tax benefit (of depreciation)the amount of depreciation deductible for tax purposes multiplied by the tax rate; Tax booksSet of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's Tax clawback agreementAn agreement to contribute as equity to a project the value of all previously tax deferralpostponing taxation of an amount until a future date Tax deferral optionThe feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is tax-deferred incomecurrent compensation that is taxed at a future date Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |