Adding and removing tax
Add tax: tax = price × rate ÷ 100, total = price + tax Remove tax: price = total ÷ (1 + rate ÷ 100), tax = total − price
To remove tax, divide by 1 plus the rate. Don't just subtract the rate as a percentage of the total: with 20% tax, a total of 120 is 100 plus 20 tax, but 20% of 120 is 24.
Step by step
Adding tax. You're buying a $49.99 item where the combined rate is 7.25%:
- Turn the rate into a decimal: 7.25 ÷ 100 = 0.0725.
- Multiply by the price: $49.99 × 0.0725 = $3.624, so the tax is about $3.62.
- Add it to the price: $49.99 + $3.62 = $53.61.
Removing tax. A receipt shows $250.00 including 8.25% tax:
- Add the rate to 1: 1 + 0.0825 = 1.0825.
- Divide the total by it: $250.00 ÷ 1.0825 = $230.95 before tax.
- The tax is the difference: $250.00 − $230.95 = $19.05.
Tax at common rates
| Rate | Tax on $100 | Total | Tax on $49.99 | Total |
|---|---|---|---|---|
| 5% | $5.00 | $105.00 | $2.50 | $52.49 |
| 6% | $6.00 | $106.00 | $3.00 | $52.99 |
| 7% | $7.00 | $107.00 | $3.50 | $53.49 |
| 8% | $8.00 | $108.00 | $4.00 | $53.99 |
| 9.5% | $9.50 | $109.50 | $4.75 | $54.74 |
| 10% | $10.00 | $110.00 | $5.00 | $54.99 |
Sales tax, VAT and GST
In the US, sales tax is set by states, counties and cities, so the combined rate depends on where the sale happens, and some states have no statewide sales tax. Prices are usually shown before tax and the tax is added at checkout.
Many other countries use a value-added tax (VAT) or goods and services tax (GST) that is usually included in the shelf price. Use the Remove tax mode to find the price before tax.
| Tax | Rate | Tax-inclusive price | Price before tax | Tax |
|---|---|---|---|---|
| UK VAT (standard) | 20% | £120.00 | £100.00 | £20.00 |
| UK VAT (standard) | 20% | £59.99 | £49.99 | £10.00 |
| UK VAT (reduced) | 5% | £105.00 | £100.00 | £5.00 |
| Australia GST | 10% | A$110.00 | A$100.00 | A$10.00 |
| New Zealand GST | 15% | NZ$115.00 | NZ$100.00 | NZ$15.00 |
Common mistakes
- Subtracting the rate from the gross price. Taking 20% off £100 gives £80, but the real pre-VAT price is £83.33. The tax is a percentage of the net price, not the total.
- Using only the state rate. In many US locations county and city taxes are added on top, so use the combined rate for the place of sale.
- Working out the rate from a receipt the wrong way. Divide the tax by the price before tax, not by the total: $5.85 tax on $78.00 is 7.5%.
Results are estimates for checking prices and receipts. Rules on what is taxable vary, so ask the tax authority or a professional for anything you'll file.