Use our sales tax calculator to quickly find out the total amount payable including applicable sales tax.
Use our reverse sales tax calculator to determine the pre-tax price and tax amount from a total price.
Sales tax is a consumption tax levied on the sale of goods and services. It's typically applied at the final point of sale to the consumer. In the United States, there is no national sales tax; instead, it is imposed at the state and local levels. This revenue is crucial for funding public services like schools, infrastructure, and healthcare.
Calculating sales tax is straightforward. The two main formulas you need are:
For example, for a $100 item with an 8% tax rate, the tax amount is $8.00 ($100 * 0.08), making the total price $108.00.
If you only know the final price and the tax rate, you can work backward to find the original price. This is useful for expense reporting or budgeting.
For instance, if a receipt shows a total of $53.50 with a 7% tax rate, the calculation would be 53.50 / 1.07, which equals an original price of $50.00.
While often confused, these are different systems of indirect taxation:
Sales tax is a consumption tax imposed by the government on the sale of goods and services. It is a percentage of the transaction amount, which the seller collects from the consumer at the point of sale. The seller then remits this collected tax to the appropriate government authority. Sales tax is generally a state or local government tax, and the rate can vary significantly depending on the jurisdiction. For example, in the United States, different states have different sales tax rates, and some cities or counties may impose their own additional taxes. Sales tax is an important source of revenue for state and local governments, funding things like education, infrastructure, and public services. However, sales tax is typically not applied to all goods and services, with certain items, such as food, medicine, or clothing, often exempt depending on the state.
To calculate sales tax, you first need to convert the tax rate from a percentage to a decimal. You do this by dividing the tax rate by 100. Then, you multiply this decimal value by the price of the item. The formula for calculating sales tax is: Sales Tax = Price × (Tax Rate / 100) Once you've calculated the sales tax, the total price of the item is simply the original price plus the sales tax. For example, if an item costs $50 and the sales tax rate is 8%, the sales tax would be calculated as follows: Sales Tax = $50 × (8 / 100) = $4 Thus, the total cost of the item would be $50 + $4 = $54.
To find the price of an item before tax, you can use the following formula: Price Before Tax = Total Price ÷ (1 + Tax Rate) This calculation works by reversing the process used to calculate the total price after tax. For example, if the total price of an item is $107 and the sales tax rate is 7%, you can calculate the pre-tax price like this: Price Before Tax = $107 ÷ (1 + 0.07) = $107 ÷ 1.07 = $100 So, the original price before tax was $100, and the $7 difference is the sales tax.
Sales tax, VAT (Value Added Tax), and GST (Goods and Services Tax) are all forms of consumption tax, but they differ in when and how they are applied. **Sales Tax**: This tax is typically charged at the final point of sale to the consumer. It is common in countries like the U.S., where the seller collects the tax at the time of purchase. Sales tax is applied once, and it's added to the total purchase price. Only the final consumer bears the cost of sales tax. **VAT**: VAT is levied at every stage of production or distribution. It is common in many countries, especially in Europe. Businesses collect VAT on their sales and pay VAT on their purchases, but they can often claim back the VAT they paid, which effectively makes it a tax on the added value at each stage. **GST**: GST is similar to VAT but is often used in countries like Canada, Australia, and India. The key difference is that, while VAT is applied on the value added to goods and services at each stage, GST is applied more uniformly across the supply chain. In both VAT and GST systems, businesses collect the tax from consumers but can reclaim the tax paid on inputs.
No, not all goods and services are subject to sales tax. Each state or country has its own rules and exemptions for certain goods and services. Generally, **essential items** like groceries, prescription drugs, and some clothing are exempt from sales tax to reduce the financial burden on consumers. In the U.S., each state has its own tax code, and some states may exempt certain items or even entire categories of goods from sales tax. For instance, in some states, basic food items may be exempt from sales tax, but prepared food (like a restaurant meal) is taxable. It's important to check the local tax laws to understand which items are exempt in your area. Services like education, healthcare, and financial services might also be exempt or taxed at a different rate.
Yes, in most cases, sales tax is now applicable to online purchases. This change comes after the landmark 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. The ruling allows states to collect sales tax on goods sold by online retailers, even if the retailer doesn't have a physical presence in the state. Before the ruling, online retailers were only required to collect sales tax in states where they had a physical presence (like a store or warehouse). However, now, online retailers must collect sales tax based on the buyer's shipping address. The tax rate is determined by the state, county, and sometimes even the city where the buyer lives. Some states, like Delaware, Montana, New Hampshire, and Oregon, still do not have a statewide sales tax, so purchases from online retailers in these states might be tax-free.
Use tax is a tax imposed on goods purchased outside of your state and brought into your state for use, storage, or consumption. It is a complement to sales tax and is intended to ensure that consumers who buy items from out-of-state vendors still contribute to their state's revenue. For example, if you buy a piece of furniture online from a retailer in a state with no sales tax, but you live in a state that imposes a sales tax, you are still required to pay use tax on that item. The rate of use tax is typically the same as the sales tax rate in your state. If a retailer does not collect sales tax on an out-of-state purchase, the buyer is responsible for reporting and paying the use tax directly to their state. Use tax ensures fairness for local businesses by preventing out-of-state purchases from avoiding state taxes.