How to Calculate Sales Tax: Forward and Reverse Formulas

Sales tax formulas

Convert the percentage to a decimal first by dividing by 100: 7% is 0.07, 8.875% is 0.08875.

Sellers who advertise tax-inclusive prices (common at events, food trucks and farmers markets) use the reverse formula to split each sale into taxable revenue and tax owed. A vendor selling $5.00 drinks "tax included" at 9% records $5.00 / 1.09 = $4.59 of sales and $0.41 of tax collected, and must remit that tax to the state, typically on a monthly or quarterly return.

Worked example: forward calculation

You buy a $1,299 laptop where the state rate is 6% and the local rate is 1.5%, for a combined 7.5%. Tax is $1,299 x 0.075 = $97.43. Total is $1,299 + $97.43 = $1,396.43. If you also buy a $49 case, apply the rate to the subtotal: ($1,299 + $49) x 0.075 = $101.10, total $1,449.10.

Worked example: reverse sales tax

Your receipt shows $54.13 total at a 8.25% combined rate, and you need the pre-tax amount for an expense report. Divide: $54.13 / 1.0825 = $50.00. Tax was $4.13.

A common mistake is to subtract 8.25% of the total: $54.13 x 0.0825 = $4.47, which would give $49.66. That is wrong because the tax was calculated on the pre-tax price, not on the total. Always divide by (1 + rate).

Finding the right rate

The rate that applies is generally the combined rate where you take delivery of the item. It usually stacks several layers: the state rate, plus county, city and special district (transit, stadium) rates. Two addresses in the same city can have different combined rates.

• Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska allows local sales taxes.
• California has the highest statewide base rate, 7.25%.
• By Tax Foundation's 2026 figures, Louisiana (10.13%) and Tennessee (9.61%) have the highest average combined state and local rates.
• Many states exempt or reduce tax on groceries, prescription drugs and some clothing; shipping charges are taxable in some states and not others.

Rounding, discounts and other details

• Rounding: tax is usually rounded to the nearest cent on the invoice total; some systems round per line item, which can create a one-cent difference.
• Store coupons usually reduce the taxable price. Manufacturer coupons often do not, because the store is reimbursed; rules vary by state.
• Online purchases: since the 2018 South Dakota v. Wayfair decision, most states require larger remote sellers to collect sales tax.
• Use tax: if a seller did not charge sales tax on something you use in a taxing state, you may owe the equivalent use tax to your state.

Can you deduct sales tax on your federal return?

Only if you itemize. On Schedule A you can choose to deduct state and local general sales taxes instead of state and local income taxes, which mostly helps people in states with no income tax. The deduction counts toward the state and local tax (SALT) cap, which the One Big Beautiful Bill Act raised to $40,000 for 2025 and $40,400 for 2026 (half for married filing separately), reduced for modified AGI above $500,000 in 2025 ($505,000 in 2026), but not below $10,000.

Quick multipliers for common rates

Keep these handy for mental math. The forward multiplier gives the total on a $100 purchase; the reverse figure shows the pre-tax price inside a $100 total.

Same purchase, different states: why the rate matters more than the math

The formula never changes, but the rate does, a lot. Take a $480 purchase. In Texas, the state rate is 6.25% and local governments can add up to 2%, so most buyers pay the 8.25% maximum: $39.60 of tax. At Tennessee's average combined rate of 9.61%, the tax is $46.13. At California's 7.25% statewide base rate, before any district taxes, it is $34.80. In Oregon it is zero.

So the most useful step is getting the right rate for the delivery address, not doing the multiplication. State revenue departments publish address-based rate lookups. Use those rather than a ZIP code average, because one ZIP code can cross several taxing districts.

Sales tax formulas for a spreadsheet

If you track purchases or invoices in Excel or Google Sheets, put the pre-tax amount in column A and the rate as a decimal (for example 0.0825) in column B. These formulas round to the cent the way most registers do.

If you are the seller: collecting and remitting

Businesses don't pay sales tax out of their own pocket. They collect it from buyers and hold it in trust for the state. Before your first taxable sale, register for a sales tax permit in each state where you have to collect. Charge the rate for the location where the sale is sourced, usually the delivery address. File returns on the schedule the state assigns, often monthly for larger sellers and quarterly or yearly for small ones.

Selling into other states can create an obligation even without a store there. In South Dakota v. Wayfair (2018), the Supreme Court upheld a South Dakota law requiring remote sellers to collect tax if, each year, they delivered more than $100,000 of goods or services into the state or made 200 or more separate sales there. Most states with a sales tax now have similar economic nexus rules, but the thresholds vary, so check each state's revenue department before you assume you are under it.

• Keep resale and exemption certificates for every sale you don't tax. Without one on file, the state can treat the sale as taxable and bill you for the tax.
• Marketplace facilitators such as large online platforms generally collect and remit tax for sales made through them, but you may still have to file returns in your home state.