How to Calculate Sales Tax (and Work Backward from a Total)

To calculate sales tax, multiply the taxable price by the combined sales tax rate for the place where the sale happens. An $84.99 purchase at 8.25% has tax of $84.99 × 0.0825 = $7.01, for a total of $92.00. To find the total in one step, multiply by 1 plus the rate: $84.99 × 1.0825. To strip tax out of a receipt total, divide by 1 plus the rate instead. The hard part is usually not the arithmetic but knowing the correct rate and what is taxable.

The formulas

Convert the percentage to a decimal first: 8.25% = 0.0825, 6% = 0.06, 10.25% = 0.1025. The sales tax calculator and the reverse sales tax calculator apply these formulas directly.

Step 1: Find the combined rate

In the US, sales tax is set by states and localities, not the federal government. The rate at the register is usually a stack of several:

Combined rates range from 0% in Oregon to more than 10% in some cities in states such as Alabama, Arkansas, California, Illinois, Louisiana and Washington. Five states, Alaska, Delaware, Montana, New Hampshire and Oregon, have no statewide sales tax, though Alaska and parts of Montana allow local taxes. Look up the rate by address on your state revenue department’s website, or start with the base rates in the state sales tax calculator.

For in-person purchases, the rate is the one where the store is. For deliveries, most states use the rate at the delivery address (destination-based sourcing).

Step 2: Determine what is taxable

Not every item is taxed at the full rate. Common differences between states:

• Groceries: exempt in most states, taxed at a reduced rate in some, fully taxed in a few.
• Prescription drugs: exempt nearly everywhere.
• Clothing: exempt in a few states, sometimes only below a price threshold.
• Services: many states tax few services; others tax a broad range.
• Shipping and delivery charges: taxable in some states, exempt in others if separately stated.

On a receipt with $45 of exempt groceries and $30 of household goods at 7%, the tax is $30 × 0.07 = $2.10, not 7% of $75.

Step 3: Apply discounts, coupons and trade-ins

Store discounts reduce the taxable price. A $120 jacket at 25% off with 8% tax:

• Sale price: $120 × 0.75 = $90.00
• Tax: $90.00 × 0.08 = $7.20
• Total: $97.20 (tax on the full $120 would have been $9.60)

Manufacturer coupons are different, because the retailer is reimbursed by the manufacturer. Many states tax the price before the coupon. The discount calculator handles the sale-price step.

Vehicle trade-ins reduce the taxable amount in most states. On a $32,000 car with a $12,000 trade-in at 6.5%, tax on the $20,000 difference is $1,300 instead of $2,080 on the full price. A few states, such as California, tax the full price regardless of the trade-in.

Step 4: Round correctly

Sales tax is rounded to the nearest cent, normally rounding half a cent up. Some states require calculating tax on the invoice total; others allow item-by-item rounding, which can make a receipt differ by a cent or two from a hand calculation. If you sell goods, follow your state’s rounding rule exactly.

Working backward from a total

If you only know the total paid, divide by (1 + rate). A receipt for $107.49 at 7.5%:

• Pre-tax price: $107.49 ÷ 1.075 = $99.99
• Tax: $107.49 − $99.99 = $7.50

A common error is to subtract 7.5% of the total: $107.49 × 0.075 = $8.06, which would put the pre-tax price at $99.43, wrong by 56 cents. The tax was charged on the pre-tax price, not on the total, so you have to divide.

To find the rate that was charged when you know both numbers: rate = (total ÷ pre-tax price) − 1. For $92.00 on an $84.99 item, (92.00 ÷ 84.99) − 1 = 8.25%.

Quick reference table

Tax and total for common prices:

Sales tax vs. use tax

When you buy something for use in your state and the seller does not collect your state’s sales tax, most states charge a use tax at the same rate, payable by the buyer, often on the state income tax return. Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers above sales thresholds to collect tax, so most large online retailers now collect it at checkout. Use tax still applies to purchases from smaller sellers that do not.

Tips for businesses

• Register before you collect. Collecting tax without a permit, or failing to collect when required, both create liabilities.
• Show tax separately on receipts and invoices.
• Track exemption certificates for resale and nonprofit customers.
• Do not count sales tax as revenue. It is money held for the state, so it does not belong in margin or profit calculations; see margin vs. markup.

Can you deduct sales tax?

If you itemize deductions on your federal return, the IRS lets you deduct either state and local income taxes or state and local general sales taxes, not both, subject to the state and local tax (SALT) deduction cap. The sales tax option mainly helps residents of states with no income tax. The IRS publishes optional sales tax tables, and you can add tax paid on large purchases such as a vehicle. Most taxpayers take the standard deduction, so the choice matters only if you itemize.

For the bigger picture of how taxes affect your pay, see how to calculate net pay. To total a cart with quantity, discount and tax together, try the sales calculator.

This guide is general information, not tax advice. Sales tax rates and taxability rules change frequently and vary by state and locality; confirm current rules with your state department of revenue.