Reverse Calculate The Sales Tax Amount That Was Included Into The Total Final (After Tax) Price, Find Price Before Tax

Latest sales taxes reverse calculated out of final prices

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Sales Tax Amount and Sales Tax Rate

What is the "Sales Tax"? What is the "Sales Tax Rate"?

• Note: The U.S. is one of the few developed countries where conventional sales taxes are still used.
• A sales tax is a consumption tax imposed by states, counties or/and cities and municipalities on the sale of goods and services. The sales tax is paid by the final consumer to the retailer at the point of sale as a percentage of the selling price of the sold good or service.
• This percentage, called the Sales Tax Rate, varies from state to state, in Texas for example there is a general sales tax rate of around 6.25%. Cities and/or municipalities of Texas are also allowed to collect their own sales tax with rates ranging up to 2%. So a combined sales tax rate could build up to 8.25% or even more if we also add up the county sales tax rate... 6.25% is the lowest possible sales tax rate in Texas, 6.3%, 6.5%, 6.75%, 7%, 7.25%, 7.5%, 7.75%, 8%, 8.125% or 8.25% are all the other possible sales tax rates.
• The sales tax amount paid for by the final consumer is then transfered by the retailer to the state, county or/and municipality. A significant volume of documentation is gathered in order to prove which economic entity is ultimately liable for charging the end users the sales tax along with the price of sold items or services.
• Let's say that a farmer sells apples to a company that produces cider. To avoid paying the sales tax, the cider maker must obtain a resale certificate from the government saying that it is not the end user. The cider maker then sells its product on to a retail store, which will charge the final customer the sales tax along with the price of cider.
• Let's say that a person who lives in an area where the sales tax rate is 5% bought some cider and had to pay a total of a \$525 dollar bill that included the sales tax.
• "Sales tax amount" = "Sales tax rate%" × "Price without sales tax".
• "Sales tax charged price" = "Price without sales tax" + "Sales tax amount" = "Price without sales tax" + "Sales tax rate%" × "Price without sales tax" = "Price without sales tax" × (1 + "Sales tax rate%").
• "Price without sales tax" = "Sales tax charged price" ÷ (1 + "Sales tax rate%") = \$525 ÷ (1 + 5%) = \$525 ÷ (1 + 5/100) = \$525 ÷ (1 + 0.05) = \$525 ÷ 1.05 = \$500 dollars.
• That person had to pay a "Sales tax amount" = "Sales tax charged price" - "Price without sales tax" = \$525 - \$500 = \$25 dollars.

How to calculate the price of a good or service without the sales tax? How to reverse calculate the selling price without the sales tax out of the final sales tax charged price?

• "Sales tax amount" = "Sales tax rate%" × "Price without sales tax"
• "Sales tax charged price" =
"Price without sales tax" + "Sales tax amount" =
"Price without sales tax" + "Sales tax rate%" × "Price without sales tax" =
"Price without sales tax" × (1 + "Sales tax rate%")
• In conclusion:
• "Price without sales tax" = "Sales tax charged price" ÷ (1 + "Sales tax rate%")

An example of reverse calculating the price without the sales tax:

• If "Sales tax rate" is 6.5% and we paid a final total "Sales tax charged price" of \$745.5 dollars:
"Price without sales tax" = "Sales tax charged price" ÷ (1 + "Sales tax rate%") = \$745.5 ÷ (1 + 6.5%) = \$745.5 ÷ (1 + 6.5/100) = \$745.5 ÷ (1 + 0.065) = \$745.5 ÷ 1.065 = \$700 dollars;
"Sales tax amount" = "Sales tax charged price" - "Price without sales tax" = \$745.5 - \$700 = \$45.5 dollars;