Adding sales tax to a price
Sales tax is charged as a percentage of the price. To find the total, multiply the pre-tax price by one plus the tax rate: $250 at 8.25% tax is 250 × 1.0825 = $270.63, of which $20.63 is tax. To find the tax alone, multiply the price by the rate: 250 × 0.0825 = $20.625, which rounds to $20.63. Retailers usually round tax to the nearest cent on the total of a receipt rather than item by item, so a receipt can differ from adding up individually rounded items by a cent or two.
Removing tax from a total
Sometimes you only know the tax-inclusive amount, for example from a receipt, an expense report or a price that includes VAT. To find the pre-tax price, divide the total by one plus the rate, not multiply by one minus the rate. A $270.63 total at 8.25% tax is 270.63 ÷ 1.0825 = $250.00 before tax. A common mistake is to subtract 8.25% of the total, which gives $248.30 and understates the original price. Choose “tax-inclusive” in the menu and the calculator does the division for you.
US sales tax rates
The United States has no national sales tax. Instead, 45 states and the District of Columbia charge a statewide sales tax, and many cities, counties and special districts add local taxes on top. State rates range from 2.9% in Colorado to 7.25% in California, and combined state and local rates can exceed 10% in parts of Louisiana, Tennessee, Arkansas, Washington and Alabama. Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, though some Alaska localities charge one. Many states exempt or reduce tax on groceries and prescription medicine. Because rates change and depend on exact location, check your state revenue department for the current combined rate.
VAT and GST
Most other countries use a value-added tax (VAT) or goods and services tax (GST) instead of a retail sales tax. The math is the same, but prices shown to consumers usually already include the tax. The UK standard VAT rate is 20%, so a £120 price contains £20 of VAT. Canada combines a 5% federal GST with provincial taxes in some provinces, Australia’s GST is 10%, and EU VAT rates range from 17% to 27%. Businesses registered for VAT often need to extract the tax from inclusive prices, which is exactly what the remove-tax mode does. If you sell to customers in several places, keep in mind that the rate usually depends on where the buyer receives the goods, so an online store may need to charge different rates on different orders.
Frequently asked questions
How do I calculate sales tax?
Multiply the price by the tax rate as a decimal. For 7% tax on $40, that is 40 × 0.07 = $2.80.
How do I remove tax from a total?
Divide the total by one plus the rate. At 10% tax, a $110 total was $100 before tax.
Which states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, although some Alaska localities do.
Is shipping taxable?
It depends on the state. Some tax shipping charges, especially when they are part of the sale, while others do not.