How it works
Sales tax is a percentage added on top of the price at the register. To go the other way, from a total that already includes tax, you divide instead of subtracting a percentage.
Example. At an 8.25% rate, a $19.99 item has $1.65 in tax, for a total of $21.64.
Working backward, $21.64 ÷ 1.0825 = $19.99 before tax.
Why you can't just subtract the percentage
Taking 8.25% off a tax-included total gives the wrong answer, because the tax was calculated on the smaller, pre-tax price. 8.25% of $21.64 is $1.79, which is 14 cents more than the tax actually charged. Dividing by 1.0825 gets it right.
This matters when you're pricing something as "tax included," like an even-dollar item at a counter, and need to know how much of it is actually yours.
Finding your rate
Sales tax rates are set by states and often stacked with county, city and special district taxes, so two stores a few miles apart can have different rates. Some products are taxed at a different rate or not at all. In many states, for example, groceries are exempt or taxed at a lower rate than prepared food. Check your state's revenue department for the combined rate at your address and the rules for what you sell.
Common questions
- How does rounding work?
- The tax is rounded to the nearest cent, which is how most registers do it. Your register may round line by line or on the whole receipt, so a receipt with many items can come out a penny or two different.
- Is sales tax part of my sales?
- No. You collect it on the state's behalf. Leave it out of your sales figures when working out margins or using the gross profit calculator.
Last updated October 11, 2026.