Sales Tax & VAT Calculator
Extracting tax is not the same as taking the percentage off. On $120 including 20% tax the tax is $20, not $24 — you divide rather than multiply.
Total with tax
$270.63
- Before tax
- $250.00
- Tax
- $20.63
- Total
- $270.63
- Rate
- 8.25%
- The rate is yours to enter. Sales tax and VAT rates differ by country, state and sometimes by product, and they change — so nothing is published here that would go out of date.
- Prices are usually quoted excluding sales tax in the US and including VAT in much of Europe, which is why the same shelf price means different things in different places.
About sales tax and VAT
Adding tax is the easy direction. $250 at 8.25% is $20.63 of tax and $270.63 to pay. Multiply and add.
Going backwards is where people go wrong. If a price of $120 already includes 20% tax, the tax inside it is not 20% of $120. The $120 is 120% of the pre-tax amount, so you divide by 1.2 to get $100 and the tax is $20. Taking 20% of the gross would give $24, which is a fifth too much.
That distinction matters constantly for anyone running a business. Reclaiming VAT, reporting net revenue and reconciling a till all depend on extracting tax correctly from inclusive figures, and the error compounds across every transaction.
Which direction you need depends on where you are. US prices are almost always quoted before sales tax, which is added at the till and varies by state, county and sometimes city. In much of Europe, prices to consumers must include VAT by law, so the tax is already in the number on the shelf.
The rate is yours to enter, deliberately. Rates differ by jurisdiction, by product category — food and books are often reduced or zero — and they change with budgets. Publishing any of them here would be publishing something that expires.
What it works out
- Tax added to a net price
- Tax extracted from a tax-inclusive price
- Any rate — sales tax, VAT, GST
The formula
Adding: Gross = Net × (1 + Rate) Extracting: Net = Gross ÷ (1 + Rate)
The two are inverses, and writing them next to each other makes the common error obvious.
Adding 8.25% to $250: multiply by 1.0825 to get $270.63, of which $20.63 is tax.
Extracting 20% from $120: divide by 1.2 to get $100, so the tax is $20. The wrong method — 20% of $120 — gives $24, overstating the tax by a fifth and understating the net revenue by the same.
There is a shortcut worth memorising for common rates. At 20% VAT, the tax inside a gross figure is the gross divided by six. At 5%, divide by 21. In general, the divisor is (1 + rate) ÷ rate.
The error scales with the rate, which is why it matters more in VAT countries than in US sales tax ones. At 8.25% the difference between the right and wrong method is small; at 25% it is a quarter of the tax.
- Net
- The price before tax.
- Gross
- The price including tax.
- Rate
- Your local rate. Varies by place and often by product category.
A worked example
$250 before tax, at a rate of 8.25%.
That works out to $270.63 .
- Before tax
- $250.00
- Tax
- $20.63
- Total
- $270.63
- Rate
- 8.25%
Questions
How do I add sales tax to a price?
Multiply by one plus the rate. $250 at 8.25% is $250 × 1.0825, which is $270.63 — $20.63 of tax.
How do I work out the VAT inside a price?
Divide by one plus the rate. $120 including 20% VAT is $120 ÷ 1.2 = $100 net, so $20 of VAT. Taking 20% of $120 gives $24 and is wrong.
Why can I not just subtract the percentage?
Because the percentage was applied to the smaller number. The gross is 120% of the net, so the tax is a fifth of the gross rather than a fifth of the net — different bases, different answers.
Is there a shortcut for 20% VAT?
Divide the gross by six. $120 ÷ 6 = $20 of VAT. It works because 20% of the net is one sixth of the gross, and it is much faster than the general formula.
Why is no rate shown by default?
Because rates differ by country, state, county and product category, and they change. Anything published here would be wrong somewhere and out of date everywhere within a year or two.
What is the difference between sales tax and VAT?
Sales tax is charged once, at the final sale to a consumer. VAT is charged at every stage with businesses reclaiming what they paid, so only the end consumer bears it. For a shopper the effect is similar; for a business the accounting is completely different.
Do I charge tax on the price before or after a discount?
After, in almost all systems — tax applies to what is actually paid. Coupons funded by a manufacturer rather than the retailer are sometimes treated differently, which is a rules question rather than an arithmetic one.