Calculate Sales Tax

It's really important to know how much an item is going to cost before you purchase it. It's not as easy as just looking at the price tag; sales tax must be calculated in order to determine the total cost. Sales tax rates are increasing, which makes the tax impact on a purchase more significant. Use these tips to learn how to calculate sales tax on your retail purchases.

Steps

Calculating Total Cost

  1. Multiply the cost of an item or service by the sales tax in order to find out the total cost. The equation looks like this: Item or service cost x sales tax (in decimal form) = total sales tax. Add the total sales tax to the Item or service cost to get your total cost.
    • Make sure you put the sales tax into decimal form. You do this by taking the percentage and sliding the decimal point two places to the left:
      • 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
    • Example: $60 (item cost) x .075 (sales tax) = $4.5 total sales tax
  2. Once you've calculated sales tax, make sure to add it to the original cost to get the total cost. If the total sales tax is $5 and your original item cost was $100, your total cost will be $105.

Examples

  1. Try this example. You're buying a basketball in the state of Colorado, where sales tax is 2.9%.[1] The basketball costs $25. How much is the total cost of the basketball, including sales tax?
    • Convert the percentage sales tax into decimal form: 2.9% becomes .029.
    • Multiply it out: $25 x .029 = $.73, or $25.73 total cost
  2. Try another example. You're buying groceries in the state of Mississippi, where the sales tax is 7%.[2] The grocery bill costs $300. How much is the total cost of the grocery bill, including sales tax?
    • Convert the percentage sales tax into decimal form: 7% becomes .07.
    • Multiply it out: $300 x .07 = $21, or $321 total cost
  3. Try a third example. You're buying a car in the state of Massachusetts, where sales tax is 6.25%.[3] The car costs $15,000. How much is the total cost of the car, including sales tax?
    • Convert the percentage sales tax into decimal form: 6.25% becomes .0625.
    • Multiply it out: $15,000 x .0625 = $937.5, or $15,937.5 total cost

Calculating Sales Tax Rate

  1. "De-calculate" by working backward, as long as you know the original cost of the item or service. Let's say you bought a computer, listed at $1,200, and the total bill came out to $1,266, meaning that the sales tax was $66. What is the sales tax rate?
    • Take the tax rate and divide it by the original price: $66 ÷ $1,200 = .055
    • Convert the decimal into a percentage by moving the decimal point two places to the right: .055 becomes 5.5%
    • Your original sales tax rate is 5.5%

Other Information

  1. Know that some American states do not have sales tax. These states currently include:
    • Delaware
    • New Hampshire
    • Montana
    • Oregon
    • Alaska
  2. Know that states 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%.[4]
    • New Hampshire, for example, has no general sales tax but still taxes prepared food at 9%.
    • Massachusetts, for example, only starts counting sales tax associated with clothing when the bill exceeds $175. So if you buy under $175 worth of clothing in Massachusetts, the state government won't tax it.
  3. Be sure to check with your local state and city when calculating sales tax. We don't often talk of "city sales tax," but it's there. Most people, however, just lump it in with state sales tax. If you want to know exactly how much money you'll pay in taxes for a certain item, check your local state and city tax laws for more information



Tips

  • When calculating sales tax, round up to the next penny if you get an amount that has too many decimal places. If your purchase price is $35.50 and your sales tax rate is 7.4 percent, the total when you multiply them is $2.627. Round that up to $2.63 for your amount of sales tax.

Related Articles

Sources and Citations

  1. ↑ http://www.colorado.gov/cs/Satellite/Revenue/REVX/1178305433490
  2. ↑ http://www.dor.ms.gov/taxareas/sales/rates.html
  3. ↑ http://www.mass.gov/dor/individuals/taxpayer-help-and-resources/tax-guides/salesuse-tax-guide.html
  4. ↑ http://www.taxrates.com/state-rates/washington-dc/

You may like

Retrieved from "https://kipkis.com/index.php?title=Calculate_Sales_Tax&oldid=351291"