Question

Gross receipts, value added, and net income are three different potential business tax bases. For each of three firms—an automobile manufacturer (assembly plant), a food retailer, and a private-practice physician—list the components of each potential tax base and describe how the bases differ among each other for one tax and among the three taxes. (5 points)

Answer 1

The answers are as follows,

An automobile manufacturer - value added, because of the reason that, the manufacturing process will only add some value to the raw material introduced into the process and nothing other than that, their equipment and labour work on the input and add some value to it to get the output.

A food retailer - net income, assume you are a food retailer, would you allow you to be taxed on gross receipts, where you are only left with small margin because you purchase it from someone else.only the margin will be taxed in this type of situations.

Practice physician - gross receipts, a gross physician is a talent seller he don't have anything to buy but to treat people and collect money which will be the entire profit because he don't have much to purchase except small expenses.