🏷️ Sales Tax Calculator
Calculate total price after sales tax or extract tax amounts from gross totals instantly.
Adding sales tax, and taking it back out of a gross price
Sales tax arithmetic runs in two directions and only one of them is intuitive. Adding tax to a net price is a multiplication. Extracting tax from a gross price is a division, and treating it as a subtraction is one of the most common errors in small-business bookkeeping.
gross = net × (1 + rate) net = gross / (1 + rate) tax = gross − net
Why you cannot just subtract the percentage
A till receipt shows $121.00 including 21% VAT. The tax is not 21% of $121, which would be $25.41. The $121 is 121% of the net price, so the net is 121 / 1.21 = $100.00 and the tax is $21.00. Subtracting instead of dividing overstates the tax by $4.41, about 21% too much, and the error scales with the rate.
| Tax rate | Net price | Tax included | Wrong answer if you subtract |
|---|---|---|---|
| 5% | $476.19 | $23.81 | $25.00 |
| 8.25% | $461.89 | $38.11 | $41.25 |
| 10% | $454.55 | $45.45 | $50.00 |
| 20% | $416.67 | $83.33 | $100.00 |
| 21% | $413.22 | $86.78 | $105.00 |
Sales tax, VAT and GST
They solve the same problem differently. US sales tax is charged once, at the final retail sale, and is normally shown separately from the shelf price. VAT and GST are charged at every stage of production, with businesses reclaiming the tax they paid on inputs, and prices are usually quoted tax-inclusive. The practical consequence for a shopper is that a European price tag is what you pay, while a US one is not.
US rates are stacked, not single
There is no federal sales tax in the US. The rate you pay is a state rate plus county, city and sometimes special district rates, which is why combined rates vary from 0% in a handful of states to over 10% in parts of Louisiana, Tennessee and Alabama. Rates are set by the delivery address, not the seller's location, for most online sales.
Many jurisdictions exempt or reduce the rate on groceries, prescription medicines and children's clothing. A single rate applied to a whole basket will be wrong wherever exemptions apply, so enter each category separately if it matters.
Working out the rate you were charged
If you have the net and the gross but not the rate, divide the tax by the net price: a $7.42 tax on a $92.75 net price is 7.42 / 92.75 = 8%. Dividing the tax by the gross gives 7.4%, which is the wrong figure and a frequent source of reconciliation errors.
A worked example
A small business receives a supplier invoice for $2,347.50 including 8.25% tax. The net is 2,347.50 / 1.0825 = $2,168.59 and the reclaimable tax is $178.91. The business then sells the goods for $3,600 net, charging $297 in tax, for a gross of $3,897. The tax it remits is the $297 collected minus the $178.91 paid, so $118.09, and its actual margin is calculated on the net figures: $3,600 − $2,168.59 = $1,431.41.
Frequently Asked Questions (FAQs)
How do I remove sales tax from a total?
Divide the gross by one plus the rate as a decimal. For 8.25%, divide by 1.0825. Never subtract the percentage from the gross, which overstates the tax by the rate squared, roughly, and gets worse as the rate rises.
What is the highest combined sales tax in the US?
Combined state and local rates exceed 10% in parts of Louisiana, Tennessee, Arkansas and Alabama. Five states have no statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire and Oregon, although some Alaskan localities levy their own.
Do I pay sales tax on online purchases?
In the US, generally yes, based on the delivery address, following the 2018 Wayfair decision that allowed states to require remote sellers to collect. In the EU and UK, VAT is charged on imports, often collected at the point of sale for low-value goods.
Is sales tax charged on shipping?
It depends on the state. Some tax shipping when it is part of a taxable sale, others exempt it when it is stated separately on the invoice. If you are a seller, check the rule for each state you ship to rather than assuming one applies everywhere.
What is the difference between inclusive and exclusive pricing?
Exclusive pricing quotes the net and adds tax at the till, which is the US convention. Inclusive pricing quotes the gross, which is the EU and UK convention for consumer sales. The same product can appear cheaper under exclusive pricing while costing the same.
Can I claim sales tax back?
Businesses registered for VAT or GST normally reclaim the tax on their inputs. US sales tax is generally not reclaimable by businesses, although purchases for resale are exempt with a valid certificate. Visitors can sometimes reclaim VAT on goods taken out of the country.