You are a local Ford dealership and you did really well last year. Your dealersh

Question

You are a local Ford dealership and you did really well last year. Your dealership has a net worth of $1,800,000.00. You are going to exceed your $8.5 million dollar sales goal for the year. Your cost of merchandise sold is expected to average 88% of sales, and your fixed operating cost are being held to $30,000.00 per month. With variable cost averaging 5% of sales, you are expected to produce almost a quater of a million in profit before taxes this year. You find out that the city is proposing to raise the sales tax by 1%. This tax would cover everything sold in the city including automobiles. The only other Ford dealership in the area is in the suburbs where the sales tax will stay the same. What should you do? Should you absorb the additional tax to keep your prices competative? What will this do to your profits? Or should you lobby city hall to persuade the council to see the errors of this tax increase?

Explanation / Answer

1. City needs taxes to provide a better lifestyle to its citizens. As A sealer, I an argue as below :- a. Differential Sales Tax within the City & SUburbs is not a good idea. It results in people living in City buying cars in Suburbs. Motor vehixle registration shoudl be based on residential address of the customer & not from where the car is purchases. This will create a level playing field. 2. May be City can reduce the Tax to 0.5% and include Suburbs Also. Thus their overall Tax colleciion may still meet the target

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