Sales Tax Calculator

The sales tax is that little number that changes the $20 price listed on a cash register screen to $21.65. It can be a burden for both buyers and small business owners. This calculator allows you to enter two of four values - net amount, tax rate, total amount or tax amount - and it will automatically calculate the remaining two values.

The tool also allows for reverse calculations, so you can create a budget before shopping, check the tax amount on a receipt, figure out the net price from the total, or find out what a business's actual tax rate is. No selection is required; just leave the unknown fields blank.

What is sales tax?

Sales tax is a tax imposed by the government on the sale of most goods and some services. The seller collects this tax at the point of purchase and remits it to the appropriate state or local taxing authorities, with the end consumer ultimately bearing the burden of the tax.

The United States does not have a national sales tax. Sales taxes are levied by states and municipalities, so the rate you will be charged depends on where your purchase is made. Five states do not collect any state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon (though Alaska and Montana may collect local sales taxes, and Delaware collects a gross receipts tax in lieu of a sales tax).

How do you calculate sales tax?

In the normal calculation only one multiplication is performed. If you multiply the price before tax by the tax rate, then you get the amount of taxes and if you add it to the price, you get the total price.

Say a jacket costs $50 and the local sales tax is 8%. The amount of tax would be $4, which is equal to 50 times 0.08, so the total cost with tax would be $54. This calculation is exactly the same as a percent increase. An 8% tax means an 8% increase in price.

The table below shows the individual values that are processed by the calculation tool along with this example.

How to calculate sales tax backwards:

If you only know the total on a sales receipt and want to figure out what the price was before taxes as well as how much tax is included, use the formula in reverse. If you divide the total by a number that's one plus the tax rate, it will strip away the tax portion. Then subtracting the pre-tax price from the total will give you the amount of tax.

If the total is $54 and the tax rate is 8 percent, then the pre-tax price is $50 and the tax amount is $4. This reverse mode can be used to separate out the tax amount from a receipt with inclusive tax. It's useful when you're reconciling expenses or claiming back sales tax that was included in business costs. If you want to figure out what tax rate the store charged, enter the pre-tax price and total amount and leave the tax rate field blank:

State and local tax rates

The tax rate listed on a receipt is almost never a single number. Because state rates are supplemented by county, city and in some cases special district taxes, the total tax rate can be different for two addresses that are only blocks apart. Open "Create Total Tax Rate" and add up the individual tax rates to enter the result into the field for the tax rate.

Some basic state tax rates and typical total tax rates can help give you a sense of what to expect. Because local surcharges and exemptions change frequently, these numbers should be considered rough estimates rather than the exact taxes for any given address.

The difference between sales tax and value added tax (VAT)

In most countries of the world Value Added Tax (VAT) is levied instead of sales tax. The difference lies in where the burden of taxation falls. Sales tax is a single-stage tax which is levied only once at the final sale to the consumer. VAT is a multi-stage tax, which is levied at every stage from raw materials to finished product and each business pays taxes only on the value it has added.

Although the amount of tax borne by the end consumer is essentially the same in both systems, VAT makes evasion more difficult because the collection process is spread over different stages of the supply chain. More than 160 countries use a value-added tax or similar goods and services tax. The United States remains a large economy that uses sales tax.

Tips for correct calculation:

• The VAT rate depends on the place of sale, not your address. When ordering online, it is usually the delivery location that will be charged with the VAT.

• Please note the exceptions to taxation. In many states food, prescription drugs or clothing up to a certain price are exempted by special regulations so that the actual VAT for a basket of mixed items can be lower than the nominal tax rate.

• If you itemize on your federal tax return, then you can deduct the sales tax paid from your state income taxes. Keep receipts for major purchases like cars or appliances.

• Check the receipt in reverse mode. If the amount of VAT does not match the result of multiplying the pre-tax price by the rate of VAT, there may be an input error.