Understanding Sales Tax Calculations
Sales tax is a consumption tax imposed by governments on the sale of goods and services. Calculating it correctly is essential for both consumers budgeting for a purchase and business owners setting prices.
Tax-Exclusive vs. Tax-Inclusive
There are two primary ways to look at sales tax:
- Tax-Exclusive (Add-on): The price listed does not include tax. You add the tax percentage on top of the price.
- Tax-Inclusive (Built-in): The price listed already includes the tax. This tool helps you "reverse" the calculation to see how much of that total was actually tax.
To calculate tax manually: Multiply the price by the tax rate (e.g., $100 × 0.07 = $7). To find the pre-tax price from a total: Divide the total by (1 + tax rate).