The basic tax formula
Calculating tax on a price requires two pieces of information: the pre-tax price and the tax rate (as a percentage). The formula is straightforward multiplication.
Tax Amount = Price x Tax Rate / 100
Once you have the tax amount, add it to the original price to get the total:
Total = Price + Tax Amount
Or combine both steps into one:
Total = Price x (1 + Tax Rate / 100)
Step-by-step example: adding tax
You buy a laptop for $850 and the sales tax is 8%. What is the total cost?
- Calculate the tax amount: 850 x 8 / 100 = 850 x 0.08 = $68.00
- Add to the price: $850 + $68.00 = $918.00
The total cost including tax is $918.00.
Using the one-step formula: 850 x (1 + 8 / 100) = 850 x 1.08 = $918.00
Example: different tax rates
A restaurant meal costs $65 before tax. The combined state and local tax is 9.25%. What is the total?
Tax = 65 x 9.25 / 100 = 65 x 0.0925 = $6.01 (rounded to nearest cent)
Total = $65 + $6.01 = $71.01
Different jurisdictions have different rates. Always confirm the applicable rate for your location. This calculator uses whatever rate you enter -- it does not determine which rate applies.
Finding the pre-tax price from a total
Sometimes you know the total including tax and need to work backwards to find the original price. This is a reverse percentage calculation.
Pre-tax Price = Total / (1 + Tax Rate / 100)
Example: reverse tax calculation
You paid $216 total at a store and know the tax rate is 8%. What was the price before tax?
Pre-tax price = 216 / (1 + 8 / 100) = 216 / 1.08 = $200.00
The pre-tax price was $200.00 and the tax was $16.00.
Common mistake: subtracting the percentage
A tempting shortcut is to subtract 8% from $216: 216 - (216 x 0.08) = 216 - 17.28 = $198.72. This is wrong. You would be taking 8% of the larger total, not 8% of the original price. The error grows with the tax rate. At 20% tax, the mistake would be significant: on a $240 total the shortcut gives $192 instead of the correct $200.
Combining tax with discounts
When a purchase includes both a discount and tax, the order matters. The standard approach is to apply the discount first, then add tax to the discounted price.
Example: An item costs $100, with a 20% discount and 8% tax.
- Apply discount: $100 x (1 - 0.20) = $80.00
- Add tax: $80.00 x 1.08 = $86.40
Final price: $86.40.
Some jurisdictions require tax on the original price before discounts for certain products. Check local regulations if you are handling business transactions.
Related calculators
Try the tax calculations with your own price and rate.