The formulas
Adding tax to a price before tax:
- Tax = price × rate ÷ 100
- Total = price + tax
For example, $250.00 at 7% is $17.50 of tax and $267.50 in total.
Taking tax out of a price that includes it:
- Price before tax = total ÷ (1 + rate ÷ 100)
- Tax = total − price before tax
For example, $267.50 including 7% tax is $250.00 before tax and $17.50 of tax. Dividing, not subtracting 7%, is the step people most often get wrong: 7% of $267.50 is $18.73, which is too much.
Results are rounded to the cent. When a tax-inclusive total is split, rounding can occasionally leave the generator’s tax a cent different from the figure here; the invoice’s own arithmetic is the one to keep.
Finding your rate
This calculator has no rates built in, deliberately. In the US, sales tax is set by states and often added to by counties, cities and special districts, so two addresses a few miles apart can have different combined rates; rates also change, and what is taxable differs from state to state. Elsewhere, VAT and GST rates depend on the country and the product.
To find the rate for a sale:
- Use your state’s department of revenue (or your country’s tax authority), which publishes current rates and lookup tools.
- Use the rate for the place the sale is taxed. For goods shipped to a customer, that is often the delivery address; for services and in-person sales, the rules differ.
- Check whether what you sell is taxable at all. Many states tax goods but not most services; some tax both.
If you are not sure whether you need to collect sales tax, ask an accountant before you invoice. This page explains arithmetic, not tax law.
On an invoice
When you create an invoice from this page, the generator opens with one line at the price before tax and your rate in the tax field, labeled Sales tax. On the invoice, the tax appears as its own line beneath the subtotal, which is how most clients and accountants expect to see it. For discounts, shipping and deposits as well, use the invoice tax calculator.