Sales Tax Calculator
Multiply a pre-tax amount by a rate and add it back. Simple arithmetic, and the two things that make it error-prone in practice are finding the correct combined rate for a specific address and working backwards from a total that already includes tax.
How to use it
- Enter the pre-tax amount.
- Enter the combined sales tax rate as a percentage.
- Read the tax amount and the total.
The rate is a sum of several rates
In the United States there is no national sales tax. What applies at a given address is the sum of state, county, city, and special district rates, and the total varies over remarkably short distances.
A state rate of 6.25 percent might be joined by 1 percent county, 1 percent city, and 1 percent transit district, giving 9.25 percent. Crossing a city boundary can change the combined rate by two points or more, and special districts for transit, stadiums, or tourism can apply to some addresses within a city and not others.
Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no state sales tax, though Alaska permits local sales taxes. Combined rates elsewhere range from around 4 percent to over 11 percent in parts of Louisiana, Tennessee, and Arkansas.
Sourcing rules decide which address governs. Destination-based sourcing, the more common approach, uses the buyer address, which is why online sellers need rate determination per order rather than a single configured rate. Origin-based sourcing uses the seller location. Getting this wrong understates or overstates collections across every transaction rather than just some of them.
Working backwards from a total
A frequent need is separating tax out of an amount that already includes it — reconciling a receipt, or recording revenue net of tax.
The move people reach for is subtracting the rate, and it is wrong. Dividing is correct: total divided by one plus the rate gives the pre-tax amount. On a $108.25 total at 8.25 percent, $108.25 divided by 1.0825 is $100.00, so the tax is $8.25.
Subtracting 8.25 percent from $108.25 gives $99.32, which is off by 68 cents. The error is small per transaction and systematic, so it compounds across a ledger and will not reconcile.
What is taxable is not uniform
The rate is only half the problem. Whether an item is taxable at all, and at what rate, varies by jurisdiction in ways that resist generalisation.
Common variations:
- Groceries are exempt in many states, taxed at a reduced rate in some, and fully taxable in others. Prepared food is usually treated differently from unprepared, which is why a rotisserie chicken and a raw one can carry different tax.
- Prescription drugs are widely exempt; over-the-counter medicines usually are not.
- Clothing is exempt in a few states, exempt below a price threshold in others, and fully taxable elsewhere.
- Digital goods and software-as-a-service are taxed inconsistently, and this is an area of active legislative change.
- Services are exempt by default in many states but specific services are enumerated as taxable, and the lists differ substantially.
- Shipping charges are taxable in some states, exempt in others, and in some depend on whether shipping is stated separately from the goods.
Sales tax and VAT are structurally different
United States sales tax is levied once, at the final retail sale, and is normally shown separately from the shelf price. Businesses buying for resale present an exemption certificate and pay no tax.
Value-added tax, used across most of the rest of the world, is charged at every stage of production, with businesses reclaiming the tax they paid on inputs. The net revenue is similar but the mechanics differ, and consumer prices are usually quoted inclusive of VAT.
Two practical consequences. Displayed prices in VAT countries include tax while United States prices generally do not, which surprises visitors in both directions. And for cross-border selling the compliance models are entirely different: a business selling into the EU may need to register and remit VAT under thresholds unrelated to anything in United States law.
Economic nexus
Since the 2018 Wayfair decision, states may require sellers with no physical presence to collect sales tax once they cross an economic threshold — commonly $100,000 in sales or 200 transactions into that state annually.
Every state sets its own threshold and measurement period, so a growing online seller can acquire collection obligations in a dozen states without ever noticing. Because the obligation attaches to the seller rather than the buyer, uncollected tax generally becomes the seller liability, with penalties and interest. Any business selling across state lines at volume should be tracking this deliberately.
At a glance
| Forward | Amount times rate, added to the amount |
|---|---|
| Reverse | Total divided by (1 + rate) gives the pre-tax amount |
| Rate | Combined state, county, city, and district |
| Transmitted | Nothing |
Frequently asked questions
How do I get the tax out of a total?
Divide by one plus the rate. $108.25 at 8.25 percent divided by 1.0825 is $100.00. Subtracting the percentage instead gives $99.32, which is wrong.
Why does the rate change across town?
The combined rate sums state, county, city, and special district rates. Crossing a boundary can change it by two points or more.
Which address determines the rate?
Usually the buyer address, under destination-based sourcing. Some states use origin-based sourcing, which uses the seller location.
Is shipping taxable?
It varies by state, and in some it depends on whether the shipping charge is stated separately from the goods.
Read more
Pricing and pay — Margin is not markup, a 20 percent discount can halve your profit, and a 40-hour week does not contain 40 billable hours.