How to Calculate Sales Tax (Formula and Examples)
3 min read
Sales tax is a percentage added to the price of most goods at checkout. Whether you are pricing a product, checking a receipt, or backing the tax out of a total, the math is quick once you know it.
Here is how to calculate sales tax both ways, with examples.
Step by step
- 1Convert the tax rate to a decimal
Divide the percentage by 100. An 8% sales tax rate becomes 0.08.
- 2Calculate the tax amount
Multiply the price by the decimal rate. Tax on a 50 item at 8% is 50 x 0.08 = 4.00.
- 3Find the total price
Add the tax to the price: 50 + 4 = 54.00. As a shortcut, multiply by 1 plus the rate: 50 x 1.08 = 54.00.
- 4Work backward from a total (reverse sales tax)
To find the pre-tax price from a total, divide by 1 plus the rate. A 54.00 total at 8% was 54 / 1.08 = 50.00 before tax.
- 5Use the calculator
Enter the price and your local rate in the Sales Tax Calculator to get the tax and total instantly, or to reverse it.
Tips
- Sales tax rates vary by state, county, and city - combine all applicable rates for your exact local rate.
- Some items (like groceries or prescriptions) are tax-exempt in many states, so not every purchase is taxed.
- To remove tax from a total, divide - do not just subtract the percentage, which gives a slightly wrong answer.
Frequently asked questions
What is the sales tax formula?
Tax = price x (rate / 100). The total is price + tax, or equivalently price x (1 + rate/100).
How do I calculate the price before tax?
Divide the total by 1 plus the rate as a decimal. A 108 total at 8% tax was 108 / 1.08 = 100 before tax.
Why can't I just subtract the percentage to remove tax?
Because the tax was added to the smaller pre-tax price, not the total. Subtracting the percentage of the total overshoots slightly - dividing is correct.