How to Calculate Sales Tax and Remove Tax From a Price

There are two common situations: you need to add tax to a price, or you already have a tax-included total and need to find the pre-tax amount. The math is different for each — here is both.

Adding sales tax to a price

Worked example:

Pre-tax price

$100

Tax rate

8% (0.08)

Tax

$100 × 0.08 = $8

Total

$100 + $8 = $108

Removing tax from a tax-included price

Worked example:

Total

$108

Tax rate

8%

Pre-tax

$108 / 1.08 = $100

Tax portion

$108 − $100 = $8

Why you can't just subtract the tax rate

Subtracting 8% from $108 does not correctly reverse an 8% tax addition. $108 × 0.08 = $8.64, not $8 — so subtracting that would give $99.36, which is wrong. The tax was originally calculated from the smaller pre-tax amount ($100), not from the larger tax-inclusive total ($108). That is why removing tax needs division, not a straight percentage subtraction.

Another example

Buying $340 in materials with a 6.5% sales tax rate:

Tax

$340 × 0.065 = $22.10

Total

$340 + $22.10 = $362.10

Reversing it: $362.10 / 1.065 = $340 pre-tax, with $22.10 as the tax portion — matching the original numbers.

A few things to keep in mind

• 8% as a decimal is 0.08 — divide the percentage by 100
• Currency amounts normally need to be rounded to the nearest cent
• Round at the end of a calculation rather than partway through, to avoid small rounding drift

Checklist

• Convert the percentage to a decimal before calculating
• Know whether your starting price already includes tax
• Use division, not subtraction, to remove tax from a total
• Round the final dollar amount to the nearest cent