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Sales Tax Calculator
Add sales tax to a price, or strip it back out of a total.
Two questions, and people get the second one wrong constantly: what does this cost with tax added, and how much tax is inside a total I have already paid? The first is easy arithmetic. The second is where the mistakes live.
Adding tax to a price
- Enter the pre-tax amount.
- Enter your tax rate as a percentage.
- Read the tax amount and the total.
- Switch modes if you need to work backwards from a gross figure instead.
- Round to two decimal places for invoicing.
Working backwards is not subtraction
This is the trap. If a receipt totals 120 including 20% tax, the tax is not 24. Subtracting 20% from 120 gives you 96, which is wrong, because the 20% was calculated on the pre-tax figure, not the total.
The correct method is to divide. 120 ÷ 1.20 = 100 pre-tax, so the tax is 20. The general rule: divide the gross by (1 + rate) to get the net. Getting this backwards understates your tax and overstates your revenue, which accountants tend to notice.
Extracting tax from a gross total
| Rate | Divide gross by | Tax inside a total of 240 |
|---|---|---|
| 5% | 1.05 | 11.43 |
| 10% | 1.10 | 21.82 |
| 15% | 1.15 | 31.30 |
| 18% | 1.18 | 36.61 |
| 20% | 1.20 | 40.00 |
| 21% | 1.21 | 41.65 |
Things that vary by country
- Whether advertised prices already include tax — most of Europe yes, most of the US no.
- Whether the rate depends on the buyer’s location or the seller’s.
- Reduced rates on food, books, children’s clothing and medicine.
- Registration thresholds below which small businesses do not charge tax at all.
- Digital goods rules, which often follow the customer’s country rather than yours.
Sales tax questions
How do I add sales tax to a price?
Multiply the price by the rate and divide by 100 to get the tax, then add it. Or multiply by (1 + rate) to jump straight to the total: 200 at 15% becomes 200 × 1.15 = 230.
How do I find the tax inside a total?
Divide the total by (1 + rate) to get the pre-tax figure, then subtract. For 240 including 20%: 240 ÷ 1.2 = 200, so the tax is 40. Never subtract the percentage directly from the total.
What is the difference between sales tax and VAT?
Sales tax is charged once, at the final sale to the consumer. VAT is collected at every stage of the supply chain with businesses reclaiming what they paid. The arithmetic on a consumer receipt looks the same either way.
Is the discount applied before or after tax?
Before, in almost every jurisdiction. The discount reduces the taxable price, and tax is then calculated on the lower figure.
How should I handle rounding?
Round to two decimal places at the line level or the invoice total, and be consistent. Different rounding points can produce a discrepancy of a cent or two, which matters when accounts have to reconcile exactly.
