How to Calculate Sales Tax : An Overview

How to calculate Sales Tax as these are increasing and are making an impact on the purchases done by us. It is more significant and knowledgeable to use the tips and learn to calculate sales tax on the retail purchases.

It’s really important to know how much an item is going to cost before purchasing it. It’s not a bit difficult to just look at the price tag and understand it. Let’s calculate sales tax in a step wise manner in order to determine the total cost.

METHODS : How to Calculate Sales Tax

  • Calculating Total Cost
  • Calculating Sales Tax Rate

Method 1 : Calculating Total Cost

Multiply the cost of item/service by the sales tax to calculate the total cost. The equation should be like this:

Item/service cost X Sales tax (in decimal form) = Total Sales Tax

Add the total sales tax to the Item/service cost to get the total cost.

Calculating Sales Tax
Change the sales tax into decimal form.

For instance:
7.5% sales tax becomes .075 in decimal form
3.4% sales tax becomes .034 in decimal form
5% sales tax becomes .05 in decimal form

Formula:

Item/service cost X Sales tax (in decimal form) = Total Sales Tax

Sample calculation:

$100 X .075 = $7.50

(item cost) X (sales tax) = (total sales tax)

Once sales tax gets calculated, ensure to add it to the original cost to get the total cost. If the Total Sales Tax is $10 and Original Item cost was $100, then Total Cost will be $110.

Method 2: Calculating Sales Tax Rate

“De-calculate” by working backward. When you know the original cost of the item, you may work backwards to figure out the sales tax rate. But for this procedure you must know how much the item initially cost.

Example :-

Let’s say you bought a LED TV, listed at $2,400, and the total bill came out to $3,000, meaning that the sales tax was $600. What is the sales tax rate?

Take the tax rate and divide it by the original price: $600 ÷ $2,400 = 0.25
Convert the decimal into a percentage by moving the decimal point two places to the right: 0.25 becomes 25%
Your original sales tax rate is 25%

More Information

You may be happy to know that some American states do not have sales tax. These states currently include:
Delaware New Hampshire Montana Oregon Alaska

Try to get information about different states those levy different taxes for different goods. A state or district, such as District of Columbia, may have a general sales tax of 6%, but set the tax rate on liquor and prepared food at 10%.
New Hampshire, for example, has no general sales tax but still taxes restaurants, food services, hotels, room rentals, and motor vehicle rentals at 9%.

Massachusetts, for example, only starts counting sales tax associated with clothing when the bill exceeds $275. So the state government won’t tax it if you buy under $275 worth of clothing in Massachusetts.

Ensure to check with the local state and city while calculating sales tax.

We don’t often talk of “city sales tax,” but it’s there to affect your purchase. Most people, however, just add it in with state sales tax. If you wish to know exactly how much money you’ll pay in taxes for a certain item, you may go to your local state and city tax department website to check the laws for more information.

So, by now you must have understood the basics of how to calculate the sales tax although the percentage of taxes may differ country to country.

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