How to calculate sales tax
Sales tax is a percentage of the pre-tax price. Your rate is usually a combination of the state rate plus county, city and special district rates, which is why two stores in the same state can charge different amounts.
Sales tax = Price × Rate ÷ 100
Total = Price × (1 + Rate ÷ 100)
Pre-tax price from total = Total ÷ (1 + Rate ÷ 100)
Total = Price × (1 + Rate ÷ 100)
Pre-tax price from total = Total ÷ (1 + Rate ÷ 100)
Example: backing tax out of a total
A receipt shows $108.25 at an 8.25% rate. The pre-tax price is $108.25 ÷ 1.0825 = $100.00 and the tax is $8.25. Note that simply taking 8.25% of $108.25 ($8.93) would be wrong.
Sales tax tips for small businesses
- You generally must collect tax based on where the buyer receives the goods (destination-based) in most states, and many states require online sellers to collect once they pass an economic nexus threshold.
- Keep collected sales tax separate from revenue. It belongs to the state.
- Many services are exempt in some states and taxable in others. Check your state revenue department.
FAQs
How do I find my exact sales tax rate?
Use your state department of revenue's rate lookup by address. Combined rates in the US range from 0% to more than 10%.
Which states have no statewide sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, though some Alaska localities levy one.
Is shipping taxable?
It depends on the state and on whether shipping is separately stated on the invoice.