Adding tax vs removing tax
Adding tax is simple: multiply the price by the rate and add it on. Removing tax from a tax-inclusive total trips people up — you can't just subtract the rate. If a $108 total includes 8% tax, the pre-tax price isn't $99.36 (108 − 8%); it's $100, because the 8% was calculated on $100, not on $108. The correct formula divides: pre-tax = total ÷ (1 + rate).
When you need each direction
- Adding tax: budgeting a purchase, quoting a customer, checking a receipt total.
- Removing tax: expense reports and bookkeeping that need the pre-tax amount, or figuring out the "real" price of a tax-inclusive item.
A note on rates
Sales tax varies enormously by location. In the US it's set by state, county, and city combined — so a single street can differ from the next town. Many US states also exempt groceries or clothing. Elsewhere, value-added tax (VAT) or goods-and-services tax (GST) is usually built into the displayed price rather than added at the register. Always use the rate that actually applies where the sale happens; this calculator handles any rate you enter.