How To Figure Sales Tax

If you are purchasing or selling an item or service, you need to know how to figure sales tax properly. Sales tax must be collected anytime goods or services are exchanged. Each state has its own sales tax rate. Different localities, such as cities, towns, counties, etc., can also add their own small sales tax amount.

You will need the following:

  • Table of sales tax rates in your community
  • Calculator or program that calculates for you
  1. Determine the appropriate sales tax rate for your locale. For example, say it is 8%.
  2. Convert the percentage into a decimal. 8% translates to 0.08. (If it were 8 1/2% it would become 0.085.)
  3. Calculate the subtotal of the purchase. Say it is $150.
  4. Multiply the subtotal by the converted sales tax. 150 multiplied by 0.08 equals 12. This means that on a purchase of $150 dollars, $12 is going to be the sales tax.
  5. Add the sales tax to the subtotal to determine the final total of the purchase. 150 added to 12 equals 162. The total cost of this purchase would be $162.  

Tips:   Sales tax isn't often so clean as in the example, with whole dollar amounts. Sometimes the decimal places extend beyond the typical two places used with money. For example, if the subtotal is $21.52 and the rate is 8.25%, the calculated sales tax will show up as 1.7754. In the event your amount goes out three places or beyond, you will need to round up to the cent. Go up if the third number is 5 or greater, and down if it is 4 or less.

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