To calculate sales tax, multiply the taxable price by the sales tax rate as a decimal. A $100 item at a 7% rate has $7 of tax ($100 × 0.07), for a total of $107. To get the total in one step, multiply the price by 1 plus the rate: $100 × 1.07 = $107.
The formula is simple. Getting the rate right is the hard part: the rate that applies is usually a combination of state, county, city and special-district rates, and it depends on where the item is delivered. To look up the exact rate for an address, use our sales tax calculator.
The sales tax formula
| What you want | Formula | Example (7% rate) |
|---|---|---|
| Tax amount | Price × rate | $100 × 0.07 = $7 |
| Total with tax | Price × (1 + rate) | $100 × 1.07 = $107 |
| Price before tax, from a total | Total ÷ (1 + rate) | $107 ÷ 1.07 = $100 |
| Tax included in a total | Total − (Total ÷ (1 + rate)) | $107 − $100 = $7 |
Convert the percentage to a decimal by dividing by 100: 6% is 0.06, 8.25% is 0.0825, 10.5% is 0.105.
How to calculate sales tax, step by step
- Find the combined rate for the delivery address. Add together every rate that applies: the state rate plus any county, city and special-district rates.
- Check that the item is taxable there. Groceries, clothing, software and services are taxed differently from state to state.
- Work out the taxable amount. Subtract seller discounts, and add shipping if the state taxes it.
- Multiply the taxable amount by the rate. Round to the nearest cent.
- Add the tax to the price to get the total the customer pays.
Worked examples
Example 1: one rate
A $50 taxable item in a state with a flat 6% rate and no local tax:
$50 × 0.06 = $3.00 tax
$50 + $3.00 = $53.00 total
Example 2: combined state and local rates
Most states let counties and cities add their own rates. In Miami-Dade County, Florida, the rate is the 6% state rate plus a 1% county surtax, so 7% combined:
$200 × 0.07 = $14.00 tax
Using the 6% state rate alone would under-collect by $2.00 on this sale. See Florida's sales tax rates by county.
Example 3: a cap on part of the tax
Some local taxes only apply to part of the price. Florida's county surtax applies only to the first $5,000 of the sales price of a single item, while the 6% state rate applies to the full price. For a $6,000 item delivered in Miami-Dade:
State tax: $6,000 × 0.06 = $360.00
County surtax: $5,000 × 0.01 = $50.00
Total tax: $410.00 (not $420.00)
Example 4: backing tax out of a total
If a price already includes tax, divide by 1 plus the rate to find the pre-tax price. A $53.50 receipt at 7%:
$53.50 ÷ 1.07 = $50.00 before tax
$53.50 − $50.00 = $3.50 tax
How to find the right rate
- Use the delivery address, not just the state. Most states are destination-based: the rate is set by where the buyer receives the item. A few states source in-state sales by the seller's location (origin-based).
- Include every local rate. State rates range from 0% to 7.25%, but combined rates in some cities are above 10%. Compare states on our sales tax rates by state page.
- Watch for changes. Local rates change often, some every quarter. A rate that was right last quarter can be wrong today.
- Only collect where you have to. You collect in a state once you have nexus there: a physical presence, or sales above the state's economic nexus threshold.
Common mistakes
- Charging the state rate only. This under-collects wherever local taxes apply, and the seller owes the difference.
- Taxing exempt items, or missing taxable ones. Taxability differs by state. Many states exempt groceries, and some exempt clothing.
- Handling shipping inconsistently. Some states tax delivery charges and some don't, and it can depend on whether shipping is listed separately on the invoice.
- Applying tax before a discount. Seller discounts generally reduce the taxable amount; manufacturer coupons often don't. Check the state's rule.
- Ignoring sales tax holidays. During a state's holiday, qualifying items under a price limit are exempt.
When to automate
Calculating tax by hand works for a few sales in one place. Once you sell across states, you need the right combined rate for every address, product taxability rules, and a watch on where you have nexus. Kintsugi automates sales tax end to end: calculation, nexus monitoring, registration and filing.
Frequently asked questions
What is the formula for sales tax?
Sales tax = price × tax rate (as a decimal). The total with tax = price × (1 + tax rate).
How do I calculate sales tax on a discounted item?
Apply the rate to the discounted price when the discount comes from the seller. For an $80 discounted item at 5%, the tax is $80 × 0.05 = $4.00.
How do I work out the tax included in a price?
Divide the total by 1 plus the rate to get the pre-tax price, then subtract. For $107 at 7%: $107 ÷ 1.07 = $100, so the tax is $7.
Is sales tax charged on shipping?
It depends on the state. Some tax shipping charges, some exempt them, and some exempt them only when they're listed separately from the item price.
How do origin- and destination-based sales tax affect the calculation?
Destination-based states use the rate at the buyer's delivery address. Origin-based states use the rate at the seller's location for in-state sales. Remote sales are generally sourced to the destination.
Where can I find the sales tax rate for an address?
Enter the address in our free sales tax calculator, or look up the state in our state sales tax guides.
