How to Calculate Sales Tax
Add sales tax to a price or back it out of a total, understand how rates work, and avoid the rounding mistakes that trip up expense reports.
Sales tax seems simple until you need to work backwards from a total, or reconcile a receipt for an expense report. This short guide covers both directions and the small details that catch people out.
Example
Sample: $100 before tax at a 6.5% rate.
This is a sample result, not your calculation. Enter your own values to replace it.
Enter any two of the three, then calculate.
After Tax Price
All three
- Before Tax Price
- —
- Sales Tax
- —
- After Tax Price
- —
Check your entries
Fill in exactly two of the three, using prices of zero or more and a rate above -100%.
Adding tax to a price
Multiply the pre-tax price by the tax rate (as a decimal), then add it back:
- Tax =
price × (rate ÷ 100) - Total =
price + tax
A $100 item at 7.25% has $7.25 of tax and costs $107.25.
Backing tax out of a total
This is the one people get wrong. To find the pre-tax price hidden inside a tax-inclusive total, divide by 1 + rate — don’t just subtract the percentage:
- Pre-tax =
total ÷ (1 + rate ÷ 100)
For a $107.25 total at 7.25%, the pre-tax price is 107.25 ÷ 1.0725 = $100, and the tax was $7.25. Subtracting 7.25% of $107.25 would give the wrong answer, because the percentage applies to the smaller pre-tax figure. The calculator above does it correctly without a mode to pick: fill in the after-tax price and the rate, leave Before Tax Price blank, and the blank box is the one it works out.
How rates are set
Sales tax varies by country, state and even city, and combined rates stack local taxes on top of state ones. Some goods — often groceries, medicine or clothing — are taxed at a lower rate or exempt entirely. Always use the combined rate that applies where the sale happens.
A note on rounding
Tax is typically rounded to the cent per transaction, so adding tax to each item can differ slightly from taxing the basket total. For everyday estimates the difference is negligible, but it explains the occasional penny that won’t reconcile.
Do it instantly, in either direction, with the sales tax calculator.