Sales Tax Calculator: How to Calculate Sales Tax
This free paycheck calculator for hourly and salaried employees estimates net pay based on taxes and withholdings. It provides an accurate breakdown of gross pay, including overtime, commissions, bonuses, and more. Deduct state and federal taxes—while factoring in employee-requested allowances—to get a clearer picture of each employee’s earnings. You can also learn how to automate your company’s payroll with QuickBooks.
What is sales tax?
Sales tax is a government-imposed tax on the sale of goods and services. It is typically calculated as a percentage of the purchase price and collected by the seller at the point of sale. The seller then remits the collected tax to the appropriate government agency.
Sales tax rates and regulations vary depending on the jurisdiction (e.g., state, county, or city), and some items or services may be exempt or taxed differently. Businesses must comply with local laws to ensure proper collection and remittance of sales tax.
Total sales tax rate = State sales tax rate + any additional local sales tax rates
How to Calculate Sales Tax?
Follow these steps to calculate sales tax accurately:
- Determine the Sales Tax Rate:
Identify the applicable sales tax rate for your location. This rate may include state, county, and local sales tax percentages.
- Identify the Taxable Amount:
Determine the total cost of the goods or services that are subject to sales tax. Some items may be tax-exempt, so subtract those from the total if applicable.
- Calculate the Sales Tax:
Multiply the taxable amount by the sales tax rate. For example:
Sales Tax=Taxable Amount×Sales Tax Rate
- Add the Sales Tax to the Total:
Add the calculated sales tax to the original price to determine the total amount the customer needs to pay.
Example:
- Taxable Amount: $100
- Sales Tax Rate: 7% (0.07)
- Sales Tax: $100 × 0.07 = $7
- Total Cost: $100 + $7 = $107
Using a sales tax calculator can simplify this process and ensure accuracy.