Sales tax is a tax levied on the sale of retail goods and services. Sometimes, a sales tax is already factored into the price of the product, and you won’t need to calculate any additional fees when trying to determine the full price. Most of the time, though, the list price of an item is pre-tax, and if you want to figure out how much you’ll be charged once you bring that item to the check-out line, you’ll need to know how to find sales tax.
Luckily, calculating the final price of an item with sales tax included isn’t hard at all. The only thing you need to know is basic arithmetic, and what the sales tax of your specific state or region happens to be. We can’t help you with the second part, but we can offer a basic arithmetic course if you need some extra guidance.
How to Find Sales Tax In Your Area
To find the sales tax in your city, you can go to your state’s official government website, locate the page for its department of revenue or revenue services, and search for tax rate information. Sales tax can vary by country, county, state, and city, plus they can change often.
Make sure to keep up to date on important things like taxes! Being aware of your past, present and future finances is important in managing a functional budget. To learn more, check out this course on personal finance.
How to Calculate Final Price With Tax
Taxes are calculated by percentages. If you have an item that’s selling for $100, and you live in a region with a 7% sales tax, what that means is the sales tax takes 7% of the price of the product and adds it to the final sale price. For an item that costs $100, a 7% sales tax would add an additional $7, because $7 is 7% of $100. This means the final sale price, with sales tax, will be $107. That’s an easy example though. Let’s look at some tougher ones.
Say you’re purchasing a huge flat screen TV that’s priced that $849.99. The sales rate in your area is 6.5%. Obviously, nobody needs to try to do this calculation in their head – unless they can – and even a pen and paper is obsolete with calculators. But even with a calculator, you need to understand how percentages work to accurately calculate this. You’re not going to enter in 849.99 × 6.5. That equals 5,524.935, which is a ridiculous amount to pay in taxes for just one TV. Remember, a percentage is actually a fraction, or a decimal. Move the decimal point over two times to the left, and 6.5% becomes 0.065.
So, multiply 849.99 × 0.065 = 55.249. Rounded up, that’s about $55.25. Add that much to $849.99 and you get $905.24. That’s how much you’ll end up paying for your TV. Remember the math!
Pre-tax price: $849.99
Sales tax rate: 6.5%
849.99 × 0.065 = 55.25
Sales tax: $55.25
$849.99 + $55.25 = $905.24
Final price: $905.24
Are you feeling a little insecure about your arithmetic? You can take a look at this guide to learn more about calculating percentages, or check out this course on advanced math skills made easy for more.
How to Find Sales Tax From Final Price
So determining what the sales tax is going to be is easy enough once you know your region’s sales tax, but how do you go about finding what your regional sales tax rate is just by looking at your receipt? There’s a way to calculate that as well! If a receipt doesn’t already display your area’s sales tax, you can look at the dollar amount that the sales tax added to the price of the item and determine what the sales tax percentage is.
You do this by taking the final, post-tax sales price of an item, subtracting the pre-tax price of the item from it, and dividing the whole thing by the pre-tax price of the item. So, say your final sale cost $107, and the item you bought was $100. That’s 107 – 100, which is 7, divided by 100, which is 0.07. So that’s a 7% sales tax.
Now for the tougher example. Let’s say you paid $3,780 total for an item that cost $3,500. First, you would take the total price and subtract the pre-tax item price from it.
(3,780 – 3,500) / 3,500 =
Then you would divide the whole thing by the pre-tax item price.
280 / 3,500 =
And you’ll find that your sales tax is…
So if you paid $3,780 for an item that was $3,500, then you bought that item in a region with an 8% sales tax rate. Congrats! Now you know how to find sales tax both ways.
Want to get great at solving sales tax problems in your head, without having to whip out your cellphone calculator in the middle of the store? Check out this course on mental math for some tips!