How to Calculate Sales Tax: Simple Formulas and Examples
Learn to add or reverse sales tax with clear formulas, worked receipt examples, and practical notes on tax-inclusive prices.
Start with the taxable purchase amount
Sales tax is commonly expressed as a percentage of the amount that is subject to tax. To calculate the right amount, first identify the actual taxable base. A shelf price, discounted price and tax-inclusive invoice may all require different calculations.
The arithmetic is simple, but deciding which items and charges are taxable depends on local rules. This guide explains the math, not legal tax obligations.
Formula 1: add tax to a pre-tax price
Sales tax = taxable subtotal × (tax rate ÷ 100)
Final total = taxable subtotal + sales tax
For a taxable $75 purchase and a rate of 6%, tax is $4.50 and the final amount is $79.50. The same method works in any currency, provided you enter the rate and amounts consistently.
| Pre-tax amount | Tax rate | Tax amount | Total |
|---|---|---|---|
| $50 | 5% | $2.50 | $52.50 |
| $75 | 6% | $4.50 | $79.50 |
| $120 | 8% | $9.60 | $129.60 |
Formula 2: remove tax already included in a price
Suppose an invoice says $107 total including 7% tax. The original price is $107 ÷ 1.07 = $100, and the included tax is $7.
Pre-tax subtotal = tax-inclusive total ÷ (1 + rate ÷ 100)
The common mistake is to subtract 7% of $107, which produces $99.51 instead of $100. The tax rate was applied to the pre-tax amount.
Discounts and taxes
A discount can change the taxable amount, depending on the rule governing the transaction. Suppose an item costs $100 and a legitimate 20% discount reduces the applicable taxable price to $80. At 8% tax, the calculation yields $6.40 tax and $86.40 total.
This is an example of the arithmetic after choosing the correct tax base, not a claim that every jurisdiction treats all discounts the same way.
Tax-inclusive versus tax-exclusive labels
Some countries commonly show tax-inclusive consumer prices; others add sales taxes at checkout. The same percentage must be handled differently depending on which figure you are entering. Avoid applying a second tax to an amount that already includes it.
Local rules, exemptions and rounding
Food, clothing, digital goods, shipping, and other items may have different rates or exemptions. Multiple taxing authorities can apply to a single purchase. Actual invoice rounding can happen per line item or at total level, so very small differences are possible.
Try the interactive calculator
Use the Sales Tax Calculator to switch between adding tax and extracting tax and to compare the resulting subtotal, tax and total. The currency setting changes formatting but does not convert exchange rates.