How To Calculate Sales Tax on Purchases

If you know how to calculate the percentage of something, then calculating sales tax on purchases should be easy. Knowing how to do this will come in handy someday. As a consumer, you should know how much you pay to cover the sales tax. Without knowing this, you might end up buying something beyond what you can pay for.

Besides that, checking the sales tax calculation is a way to protect yourself as a consumer. Follow the steps below when calculating sales tax on purchases:

  • Determine the tax. Every country or state has a different sales tax, also called value-added tax. The highest sales tax is in Europe, specifically Sweden, Denmark, and Norway, which all impose 25% sales tax. Other countries impose lesser tax. Know how much your country is imposing for the sales tax. Familiarize the exceptions also. As they say, with every rule, there is an exception. Sales tax has exceptions, too. For instance, the mentioned European countries ask for 25% tax but commodities like newspapers, books, art, and groceries have reduced taxes. Therefore, even if your country imposes 12% sales tax, you should still consider whether the item you are purchasing is included in the usual tax. Better be sure if you will be using the right sales tax percentage by visiting your country's concerned department.
  • Add purchases. Get the sum of items with the same sales tax. The computation will be inaccurate if you will combine items with different value-added tax.
  • Get the percentage. Compute the sales tax percentage from the sum of the items. For instance, if the tax is 5% and the total of the items is $100, then the percentage is $5. This is the sales tax.
  • Add the percentage to the total amount. Get the sum of the total amount of purchases and the tax percentage. The answer is the total amount you have to pay, tax included.

Example Calculation

For better understanding, try to solve this problem:

You are planning to purchase A ($5.00), B ($3.00), and C ($7.00). The sales tax for these items is 10%. You also purchased X ($50.00) and Y ($90.00). Both have 15% sales tax. How much should you pay for the items, including their respective taxes?

First, add the purchases for the 10% sales tax. Therefore, 5 + 3 + 7 = 15. Now, get the 10% of 15. That would be 0.1 * 15 = 1.5. (Note: When multiplying percentage, we move the point two times to the left to change the percentage number into a numerical number. Therefore, 10.0 becomes 0.1 after moving the point twice)

So, the share for the sales tax should be $1.5 and the total amount you will pay for the items is $16.5.

Now, add the items with 15% sales tax: 50 + 90 = 140. Get the 15% from this and you will have: 140 * 0.15 = 21. Therefore, $21 is for the sales tax. The total amount to be paid for these is $161.

Therefore, you have to pay $177.5 for all the items, sales tax included.

Most of the time, vendors automatically add the sales tax to your purchases. But sometimes, they don't do this, especially if they are marketing for a very expensive product like cars or jewelries. At least now, you already know how to calculate sales tax. Fancy marketing will never fool you anymore because you already know how to do your math.


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