The tax based on the profits (earnings) of a business is known as:

• A. Income tax
• B. Sales tax
• C. Property tax
• D. Excise tax

Answer: (A)

Verified step by step guidance

1. Understand the concept of income tax: Income tax is a tax imposed on the earnings or profits of a business or individual. It is calculated based on the taxable income, which is the profit after allowable deductions.
2. Review the definition of sales tax: Sales tax is a tax imposed on the sale of goods and services, typically paid by the consumer at the point of purchase. It is not related to business profits.
3. Examine the meaning of property tax: Property tax is a tax levied on real estate or other property owned by an individual or business. It is based on the value of the property, not the profits of the business.
4. Understand excise tax: Excise tax is a tax imposed on specific goods, such as alcohol, tobacco, or fuel. It is typically included in the price of the product and is not related to business profits.
5. Conclude that the tax based on the profits (earnings) of a business is income tax, as it directly correlates to the taxable income generated by the business.