How to separate tax from total amount

In business, it is common to issue and receive invoices for goods or services where the price is inclusive of tax. Inclusive of tax means that the price quoted includes the value of tax. In such cases, a person has to do a back-calculation to arrive at the value of tax.

In this blog, we will discuss the simple formula for you to arrive at the value of tax when the price quoted for goods or services is inclusive of tax.

Formula to arrive at tax value when price is inclusive of tax

The tax value calculation when price is inclusive of GST is:

Tax amount = Value inclusive of tax X tax rate ÷ (100+ tax rate)

Let us discuss few examples to understand this:

Mr. Ram in Karnataka supplies a television to Mr. Shyam in Maharashtra. The television’s price inclusive of GST is Rs. 50,000. Mr. Ram wants to arrive at the value of tax.

Here, GST rate applicable to television is 18%. Since this is an interstate supply, type of tax applicable is IGST.

Let us arrive at the value of IGST in this case:

Value inclusive of tax= Rs. 50,000

Tax rate= 18

Hence, IGST amount= 50,000*18/118= Rs. 7627

Let us take another scenario.

Mr. Ram in Karnataka supplies a television to Mr. Rohan in Karnataka. The television’s price inclusive of GST is Rs. 20,000.

Here, the tax rate remains same, i.e. 18%. Since the supply is intrastate, the type of taxes applicable are CGST + SGST.

Hence, value inclusive of tax = Rs. 20,000

Tax rate = 18

Hence, tax amount = 20,000*18/118 = Rs. 3050.85

Hence, CGST amount = Rs. 3050.84/2 = Rs. 1525.42

Similarly, SGST amount = Rs. 3050.84/2 = Rs. 1525.42

Hence, this simple formula can be used by any person who wants to know the tax value calculation when price is inclusive of GST. Note that in Tax Invoice under GST, the GST amount has to be shown separately in the invoice, even if a product is sold at a price which is inclusive of taxes.

Calculator Use

Calculate sales tax and total price given your state sales tax rate. Enter item price and tax rate percentage to find sales tax and total price.

What is Sales Tax?

Sales tax is a tax on the sale of goods and services. In the US and the District of Columbia all states except Alaska, Delaware, Montana, New Hampshire and Oregon impose a state sales tax when you buy items or pay for services. Alaska however does allow localities to charge local sales taxes as do many other states.

Some states do not charge sales tax on specific categories of items. In Massachusetts for example sales tax is not charged on regular grocery items. Also many states have additional tax surcharges. In the hospitality industry it is common for restaurants and hotels to charge a tax rate higher than the state sales tax rate. Check with your state and locality for expected sales tax rates and potential tax surcharge rates.

How to Calculate Sales Tax

Multiply the price of your item or service by the tax rate. If you have tax rate as a percentage, divide that number by 100 to get tax rate as a decimal. Then use this number in the multiplication process.

1. Find list price and tax percentage
2. Divide tax percentage by 100 to get tax rate as a decimal
3. Multiply list price by decimal tax rate to get tax amount
4. Add tax amount to list price to get total price

For example say you're buying a new coffee maker for your kitchen. The price of the coffee maker is $70 and your state sales tax is 6.5%.

1. List price is $90 and tax percentage is 6.5%
2. Divide tax percentage by 100: 6.5 / 100 = 0.065
3. Multiply price by decimal tax rate: 70 * 0.065 = 4.55
   You will pay $4.55 in tax on a $70 item
4. Add tax to list price to get total price: 70 + 4.55 = $74.55

Sales Tax Calculation Formulas

• Sales tax rate = sales tax percent / 100
• Sales tax = list price * sales tax rate
• Total price including tax = list price + sales tax, or
• Total price including tax = list price + (list price * sales tax rate), or
• Total price including tax = list price * ( 1 + sales tax rate)

If you need to calculate state sales tax, use tax and local sales tax see the State and Local Sales Tax Calculator.

For a table of 2022 state sales tax rates see State and Local Sales Tax Rates, 2022.

For more detail including local tax rates or type of purchase see Wikipedia Tax Tables by State.

When you purchase goods, you may wonder how much these items actually cost before the sales tax gets added to them. Either that or you may want to check the accuracy of the sales tax indicated on your item’s receipt. Fortunately, you can get this amount easily using this reverse sales tax calculator. This is a very useful tool, especially if you itemize deductions and then claim any overpaid sales taxes. Just remember to keep all of your receipts if you plan to claim these overpaid taxes from the items you’ve purchased.

• How to use the reverse sales tax calculator?
• How to calculate sales tax backward from total? 
• How to find original price before tax? 

How to use the reverse sales tax calculator?

Using this reverse tax calculator is extremely simple and easy. Use this online tool whenever you need to check the amount of the items you’ve purchased before the added sales tax. To use the sales tax calculator, follow these steps:

• There are two options for you to input when using this online calculator.
• For the first option, enter the Sales Tax percentage and the Net Price of the item which is a monetary value.
• For the second option, enter the Sales Tax percentage and the Gross Price of the item which is a monetary value.
• Upon entering the two values, the calculator will automatically generate the Tax Amount.

How to calculate sales tax backward from total? 

Most of the state and local governments would collect a sales tax on the products sold in stores. For some people, they need to know how much they had paid for, especially when they need to fill out accurate tax returns or receive monetary credits for any sales tax which they’ve overpaid. Knowing this information is very beneficial, especially if you have to make a list of any purchases you’ve made outside of your state and find out how much taxes you’ve paid on them.

You don’t pay for a reverse sales tax instead, you calculate it. The simplest way to do so is to use this reverse tax calculator. For instance, you’ve made some purchases on a business trip. As you go through the receipts, you may want to find out how much is the sales tax and how much is your actual income. Rather than calculating the sales tax from the purchase amount, it’s easier to calculate the sales tax in reverse then separate this amount from the total amount.

The computations remain the same whether you’re performing a reverse sales tax calculation using a receipt that you have, or you’re trying to figure out the price of an item before the taxes. Let’s take a look at some steps for you to calculate the sales tax backward from the total. Before you start, you should know the total amount you’ve paid for as well as the amount of tax paid. Then follow these steps:

• Subtract the tax paid from the total amount

This would give you the amount of the item before the tax. Let’s say that you purchased two books and paid a total amount of $26.75. By looking at the receipt, you find out that the tax paid is $1.75. Therefore, you can calculate the amount of the item before the tax or the pre-tax cost:

$26.75 – $1.75 = $25

• Divide the tax paid by the price of the item before tax

The result you would get is the tax rate of the item you’ve paid, and it’s expressed as a decimal value. So, let’s compute the tax rate:

$1.75 ÷ $25 = .07 

• Convert the tax rate into a percentage value

To do this, multiply the tax rate value you’ve acquired by 100 to get a percentage value:

.07 × 100 = 7% 

• Calculate the amount of tax paid

Using this method, we assume that you already know the item’s post-tax price as well as the tax rate you’ve assessed. Now you need to perform a backward calculation for you to find out how much the sales tax is.

• Add 100% to the value of the tax rate

The 100% value would represent the whole pre-tax price of the product. When you add this value to the tax rate, you’re left with a total percentage value which represents the pre-tax price along with the tax. Here’s the computation:

100% + 7% = 107% 

• Convert the value of the total percentage into decimal form

The next step is to convert the percentage value back to a numerical value with a decimal point. Therefore:

107 ÷ 100 = 1.07

• Divide the price of the item post-tax by the decimal value

Now, you divide the item’s post-tax price by the decimal value you’ve just acquired. This will give you the item’s pre-tax cost. Let’s calculate this value:

$26.75 ÷ 1.07 = $25

• Subtract the price of the item pre-tax to the price of the item post-tax

Now you know how much the books you’ve purchased costs after the taxes. So you can now subtract the item’s pre-tax price from the post-tax price:

$26.75 – $25 = $1.75

There you have it! If you notice, the tax amount you’ve seen on the receipt matches the final tax amount you’ve acquired after performing the reverse tax calculation. This type of calculation takes a lot of steps. If you don’t have any time to perform the calculation, you can use this reverse sales tax calculator instead!

How to find original price before tax? 

There are times when you may want to find out the original price of the items you’ve purchased before tax. Instead of using the reverse sales tax calculator, you can compute this manually. To find the original price of an item, you need this formula:

OP with sales tax = [OP × (tax rate in decimal form + 1)]

But there’s also another method to find an item’s original price. You can use this method to find the original price of an item after a discount or a decrease in percentage. Here are the steps:

• Subtract the discount rate from 100% to acquire the original price’s percentage.
• Multiply the final price of the item by 100.
• Finally, divide the percentage value you acquired in the first step.

How do I calculate taxable amount from total?

What is the formula of tax?

How do you subtract tax from income?