To calculate sales tax, multiply the taxable price by the sales-tax rate divided by 100. The result is the tax amount. Add that tax to the taxable price to find the final amount paid.
Add tax to a price or extract included tax using the percentage rate you provide.
A percentage rate is applied to the taxable price before the resulting tax is added to the purchase.
Sales Tax Formula
The sales-tax amount is found by applying a percentage rate to the taxable price.
Divide the percentage rate by 100 or convert it to decimal form before multiplying.
The Sales Tax Calculator completes both the tax calculation and the final-price calculation.
How to Calculate Sales Tax Step by Step
The calculation can be completed in three short stages.
- 1Identify the taxable price
Start with the amount to which the sales-tax rate applies.
- 2Calculate the tax
Multiply the taxable price by the percentage rate divided by 100.
- 3Find the final price
Add the calculated tax to the taxable price.
Worked Example: $100 at 8%
Suppose the taxable price is $100 and the sales-tax rate is 8 percent.
Multiplying $100 by 0.08 gives $8 in sales tax.
Adding the $8 tax to the $100 price gives a final total of $108.
How to Convert a Tax Rate to a Decimal
Divide the percentage rate by 100.
For example, 8 percent becomes 0.08, 7.5 percent becomes 0.075, and 15 percent becomes 0.15.
Multiplying by the decimal rate produces the same result as multiplying by the percentage and dividing by 100.
How to Find the Final Price after Tax
Once the tax amount is known, add it to the taxable price.
The final price formula is taxable price plus sales tax.
A faster equivalent method is to multiply the taxable price by one plus the decimal tax rate.
Example with a Decimal Tax Rate
Suppose an item costs $64.50 and the tax rate is 7.25 percent.
Convert the rate to 0.0725 and multiply it by $64.50.
The unrounded tax is $4.67625. Rounded to two decimal places, the tax is $4.68 and the final price is $69.18.
How Quantity Affects Sales Tax
When several identical items are purchased, multiply the price of one item by the quantity before applying tax.
Three items costing $20 each have a subtotal of $60.
At a rate of 5 percent, the sales tax is $3 and the final total is $63.
How Discounts Can Affect the Taxable Price
A discount may reduce the amount to which tax is applied.
For example, a 20 percent discount on a $100 item reduces the selling price to $80. At an 8 percent rate, tax on $80 is $6.40.
The legal treatment of discounts varies, so enter the taxable amount or method that applies to the transaction.
Sales Tax with Multiple Rates
Some transactions can involve more than one percentage rate.
When every rate applies to the same taxable price, add the rates to form a combined percentage.
For example, rates of 5 percent and 2 percent create a combined rate of 7 percent.
Rounding Sales Tax
Tax amounts are commonly rounded to the smallest currency denomination.
Keep the full calculation until the final step, then round according to the checkout or invoicing rule being used.
Small differences can occur when a system rounds tax for each item instead of rounding the combined invoice.
Common Sales-Tax Calculation Mistakes
Do not multiply a price by the whole percentage number without dividing by 100.
Do not add the tax percentage directly to the currency price.
Do not assume every item, service, discount, or delivery charge receives the same tax treatment.
Conclusion
Multiply the taxable price by the percentage rate divided by 100 to find sales tax.
Add the tax to the taxable amount to calculate the final price.
Use the Sales Tax Calculator to calculate tax, quantity, discounts, and tax-inclusive amounts.
FAQs
What is the formula for sales tax?
Multiply the taxable price by the tax rate divided by 100.
How do I find the total after sales tax?
Add the calculated sales tax to the taxable price.
What is 8 percent tax on $100?
The tax is $8 and the final price is $108.
Should I calculate tax before or after a discount?
That depends on the applicable rules and the type of discount.
Does this method work with VAT?
The percentage mathematics can add VAT when the applicable rate and taxable amount are already known.
These examples explain percentage calculations only. Tax rates, exemptions, taxable amounts, discount treatment, and rounding rules vary. Confirm the current requirements that apply to the transaction.