How to Calculate Sales Tax

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In most parts of the US and Canada, consumers must pay taxes on goods and services they purchase. The sales tax rate varies by item and by jurisdiction. You can compute the total price of an item if you know the base price (price before taxes) and the applicable sales tax rate. If the tax is included in the price, you can work backwards to figure the base price. Both scenarios are described below, or you can use the handy sales tax calculator on the left.

Computing Total Price from Base Price and Tax Rate

Express the sales tax percentage as a decimal and add 1. Then multiply that number by the price of an item. For example, if a phone costs $120 and the sales tax is 5.5%, then you compute (1+0.055)(120) = (1.055)(120) = 126.6. So you pay $126.60 for the phone. Since 126.6 - 120 = 6.6, the amount of sales tax is $6.60.

Computing Base Price from the Total Price and Tax Rate

Sometimes the sales taxes are already included in the sticker price of an item. If this is the case, then the first step is to express the tax rate as a decimal and add 1. Then divide the final price by that number. Example: Suppose the final price of a computer is $750 and the sales tax is 6%. To find the price of the computer before taxes, you compute (750)/(1.06) = 707.55. So the original price of the computer was $707.55 before taxes.

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