Last updated: May 2026
Quick Answer
To calculate sales tax, multiply your Pre-Tax Price by the Tax Rate (as a decimal). For example, $100.00 at an 8% tax rate is calculated as $100 × 0.08 = $8.00 in tax. The total is $108.00.
Key Takeaways
- ✓ Calculating Tax: Price × Tax Rate
- ✓ Calculating Total: Pre-Tax Price + Sales Tax
- ✓ Reverse Calculation: Total ÷ (1 + Tax Rate) = Pre-Tax Price
- ✓ In the US, sales tax rates vary wildly by state, county, and even city.
What Exactly Is Sales Tax?
Sales tax is a consumption tax imposed by the government on the sale of goods and services. A conventional sales tax is levied at the point of sale, collected by the retailer, and passed on to the government.
Unlike many countries that have a single, nationwide Value-Added Tax (VAT), the United States has no federal sales tax. Instead, sales tax is determined at the state and local (county/city) levels, meaning the rate you pay changes depending on exactly where the transaction occurs.
How to Calculate Sales Tax (For Consumers)
If you want to know how much tax you will pay on a purchase, follow these steps:
- Convert the percentage to a decimal: Divide your local tax rate by 100. (e.g., 8.25% becomes 0.0825).
- Multiply the price by the decimal: If an item is $50, multiply $50 × 0.0825 to get $4.12 in tax.
- Add the tax to the price: $50.00 + $4.12 = $54.12 total.
How to Reverse Calculate Sales Tax (For Businesses)
Sometimes businesses sell an item for a "tax-inclusive" flat rate (e.g., selling a t-shirt at a festival for exactly $20 cash). You need to know how much of that $20 is revenue, and how much you owe the government.
To reverse calculate, you divide the total by (1 + Tax Rate). If your tax rate is 8% and the total cash collected is $20.00:
- Pre-Tax Revenue: $20.00 ÷ 1.08 = $18.52
- Tax Owed: $20.00 - $18.52 = $1.48
State Tax Rates & Benchmarks
Because there is no federal sales tax, the rate you pay is a combination of the state base rate + local county rates + local city rates.
- States with NO Sales Tax: Oregon, Montana, New Hampshire, Delaware, and Alaska (though some local municipalities in Alaska do charge tax).
- Highest State Base Rates: California (7.25%), Indiana (7.00%), Mississippi (7.00%), Rhode Island (7.00%).
- Highest Combined (State + Local) Average Rates: Tennessee (~9.55%), Louisiana (~9.55%), Arkansas (~9.46%).
eCommerce & Nexus Rules (Wayfair)
If you run an online business, sales tax is complicated. Prior to 2018, you only had to collect sales tax in states where you had a "physical presence" (a warehouse or office).
However, the 2018 South Dakota v. Wayfair Supreme Court ruling established Economic Nexus. Now, if your business sells a certain dollar amount (usually $100,000) or a certain number of transactions (usually 200) into a specific state, you are legally required to register, collect, and remit sales tax to that state, even if you have no physical presence there.
Frequently Asked Questions
How do I calculate sales tax?
Multiply the pre-tax price by the tax rate as a decimal. For example, if an item is $100 and the tax rate is 8%, the math is $100 × 0.08 = $8.00 in tax. The total is $108.00.
How do I find the pre-tax price from a total?
Divide the total price by (1 + tax rate). For example, if you paid $108 total at an 8% tax rate, you divide $108 by 1.08, which gives you the $100 pre-tax price.
Do I have to charge sales tax online?
In the US, it depends on 'economic nexus'. Following the 2018 Wayfair Supreme Court decision, if your sales or transaction volume in a specific state crosses a certain threshold (often $100k or 200 transactions), you must collect sales tax for buyers in that state.
Are shipping costs taxable?
This varies wildly by state. In some states (like New York), shipping and handling charges are generally taxable if the goods being shipped are taxable. In other states (like Massachusetts), shipping is exempt if stated separately on the invoice.
Is sales tax tax-deductible for my business?
Yes. When your business purchases supplies or equipment, the sales tax you pay is considered part of the cost of the item and is deductible as a business expense.