How to Calculate Sales Tax and VAT
Adding tax to a price is simple multiplication — but removing tax from a tax-inclusive total trips a lot of people up, because it isn't just subtraction.
Add: total = price × (1 + rate). Remove: basePrice = totalPrice ÷ (1 + rate) — dividing, not subtracting a flat percentage of the total.
Why you can't just subtract the tax rate
Tax is calculated on the base price, not the total — subtracting a straight percentage from a tax-inclusive total overstates the tax removed. A $120 total at 20% VAT has a $100 base price ($120 ÷ 1.2), not $96 ($120 − 20% of $120).
Common use cases
Adding tax: quoting a customer a final price from your listed pre-tax price. Removing tax: figuring out your actual pre-tax revenue from a batch of tax-inclusive receipts, common when reconciling books.
Try Free Web Tools Mentioned in This Guide
Frequently Asked Questions
Does the rate differ by product or region?↓
Yes — sales tax and VAT rates vary widely by country, state/province, and sometimes product category. Always use the correct rate for your specific situation.
Is VAT the same calculation as US sales tax?↓
Mathematically, yes for a single add/remove step — though VAT systems often involve multiple stages of tax credit that a simple calculator doesn't model.