How to Calculate Sales Tax

Sales tax is a consumption tax imposed by governments on the sale of goods and services. The tax is a percentage of the purchase price, and it's collected by the seller who then passes it on to the government. This calculator simplifies the two most common tasks related to sales tax.

Mode 1: Adding Sales Tax

This is the most common use case. You know the price of an item before tax (the "sticker price") and want to know how much the sales tax will be and what the final cost will be. This is useful for budgeting before making a purchase.

• Example: A product costs $250 and the local sales tax rate is 7%.
• Calculation: $250 * 0.07 = $17.50 in sales tax. The final price is $250 + $17.50 = $267.50.

Mode 2: Reversing Sales Tax

This is extremely useful when you only have a final receipt or total price and you want to know how much of it was the actual price of the item versus the tax. This is essential for business expense reports or budgeting.

• Example: Your receipt shows a total of $105.74, and you know the tax rate was 6%.
• Calculation: The calculator determines the original price by dividing the total by (1 + the tax rate). $105.74 / 1.06 = $99.75. The tax amount is simply the difference: $105.74 - $99.75 = $5.99.