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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
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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. [1] X Research sourceCalculating Sales Tax
Change the sales tax into decimal form. For instance: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 formFormula: Item or service cost x sales tax (in decimal form) = total sales tax.
Sample calculation: $60 (item cost) x .075 (sales tax) = $4.50 total sales tax -
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Try this example. You're buying a basketball in the state of Colorado, where sales tax is 2.9%. [3] X Research source The basketball costs $25. How much is the total cost of the basketball, including sales tax?Solution
Convert the percentage sales tax into decimal form: 2.9% becomes .029.
Multiply it out: $25 x .029 = $.73, or $25.73 total cost -
Try another example. You're buying groceries in the state of Mississippi, where the sales tax is 7%. [4] X Research source The grocery bill costs $300. How much is the total cost of the grocery bill, including sales tax?Solution
Convert the percentage sales tax into decimal form: 7% becomes .07.
Multiply it out: $300 x .07 = $21, or $321 total cost -
Try a third example. You're buying a car in the state of Massachusetts, where sales tax is 6.25%. [5] X Trustworthy Source State of Massachusetts Official website for the State of Massachusetts Go to source The car costs $15,000. How much is the total cost of the car, including sales tax?Solution
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
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Know that some American states do not have sales tax. These states currently include: [7] X Research source- Delaware
- New Hampshire
- Montana
- Oregon
- Alaska
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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%. [8] X Research source- New Hampshire, for example, has no general sales tax but still taxes restaurants, food services, hotels, room rentals, and motor vehicle rentals at 9%. [9] X Research source
- 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. [10] X Trustworthy Source State of Massachusetts Official website for the State of Massachusetts Go to source
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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. [11] X Research source 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 lawsfor more information- Each city has its own tax, and it depends on where it's shipping to and where it's shipping from.
Make real-world math click.
"I've struggled with word problems and applying math concepts to real-life situations. After searching the web for help with sales tax homework, I found this guide. The step-by-step examples using actual tax rates showed me how to calculate total costs. Now, these practical math problems make sense!"
- Ella K.
Deliver your "aha" moment.
"As a visual learner, I've never fully grasped how to figure sales tax. But the pictures demonstrating the equations in this article finally made it click! I followed along on my calculator, and the lightbulb went on. These effective visuals, paired with clear instructions, delivered my "aha" moment."
- Christen J.
Empower those intimidated by math.
"Honestly, I've always found math intimidating and avoided finance concepts like sales tax. But this article explained everything in simple terms, even I could understand. After just 10 minutes of following the examples, I grasped sales tax for the first time ever. It's empowering to gain this real-world skill."
- Stacy R.
Clarify a confusing real-world skill.
"I've been stuck not understanding sales tax for years, even though I use it practically every day. This guide clearly walked through the formulas and calculations in a way I could finally comprehend. Breaking down a confusing real-world skill through visuals and straightforward instruction was so helpful."
- Saffron R.
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Glossary of Sales Tax Terms
Expert Q&A
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QuestionDoes Amazon pay sales tax for sellers?Gina D'Amore is a Financial Accountant and the Founder of Love's Accounting. With 12 years of experience, Gina specializes in working with smaller companies in every area of accounting, including economics and human resources. She holds a Bachelor's Degree in Economics from Manhattanville College and a Bookkeeping Certificate from MiraCosta College.Amazon does not pay the merchant sales tax—they collect it and give it to the appropriate state and city. It's very complicated! As a seller, it helps a lot call a sales tax agency to assist you with paying your sales tax.
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QuestionHow do I add 6% sales tax to an amount?Community AnswerMultiply the amount x 1.06. This will give you the total amount, including the tax. The "1" is 100% of the item cost, and the ".06" is the tax rate of 6%. For example, you buy a screw driver set for $10.00 and the sales tax rate is 6%. $10.00 x 1.06 = $10.60. This is your total, including tax.
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QuestionCan 6% be written as 0.0600?Community Answer6% would be 0.06, all you do is move the decimal two spaces to the left. For example 6% sales tax on an item would be calculated by multiplying the total cost by the decimal form of the percentage. Say the total cost was $30.00, it would be calculated as 30 x 0.06 = 1.8 then add the quotient to the original cost.
Video
Tips
- When calculating sales tax, round up to the next penny [12] X Research source 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.Thanks
- Sales tax is typically calculated by the merchant processing system.Thanks
References
- ↑ https://flexbooks.ck12.org/cbook/ck-12-middle-school-math-concepts-grade-7/section/6.19/primary/lesson/total-bill-including-tip-and-tax-msm7/
- ↑ https://www.calculatorsoup.com/calculators/financial/sales-tax-calculator.php
- ↑ https://tax.colorado.gov/consumer-use-tax-for-businesses
- ↑ https://www.dor.ms.gov/business/sales-tax-rates
- ↑ http://www.mass.gov/dor/individuals/taxpayer-help-and-resources/tax-guides/salesuse-tax-guide.html
- ↑ https://www.calculatorsoup.com/calculators/financial/sales-tax-calculator-reverse.php
- ↑ https://www.cnbc.com/select/states-with-no-sales-tax/
- ↑ https://cfo.dc.gov/page/tax-rates-and-revenues-sales-and-use-taxes-alcoholic-beverage-taxes-and-tobacco-taxes
- ↑ https://www.revenue.nh.gov/assistance/tax-overview.htm#meals-rental
About This Article
To figure out sales tax on an item, you’ll need to know your local sales tax rate. You can easily find this information by searching online for the sales tax rate in your city and state. Once you know the tax rate in your area, convert the sales tax rate from a percent to a decimal by moving the decimal point two places to the left. Then, multiply the resulting number by the list price of an item to figure out the sales tax on that item. So, let’s say you’re buying something that costs $27.95, with a local tax rate of 8%. You’d multiply 27.95 by .08, giving you a sales tax amount of $2.24. Add that amount to the price of the item to find your total cost with tax. In this case, the total would be $30.19. But what if you already know the total cost of an item after taxes, and you want to figure out the tax rate based on that? To do this, subtract the list price of the item from the total after taxes. This will give you the amount of sales tax you paid. Then, divide the tax amount by the list price. Move the decimal point in the resulting number 2 spaces to the right to get the tax rate as a percentage. For instance, if the list price is $72.50, and you paid $75.05, then you paid $2.55 in taxes. 2.55 divided by 72.50 is 0.035, which means the tax rate is 3.5%. For more information on how to calculate sales tax, including some examples, scroll down!
Reader Success Stories
- "Honestly, I've always found math intimidating and avoided finance concepts like sales tax. But this article explained everything in simple terms, even I could understand. After just 10 minutes of following the examples, I grasped sales tax for the first time ever. It's empowering to gain this real-world skill." ..." more
