Adding and removing tax
Adding tax to a net price
Total = Net price + Tax
Removing tax from an inclusive price
Tax = Total − Net price
The second is where mistakes happen. You cannot subtract 8.25% from a tax-inclusive total, because the 8.25% was applied to the smaller net figure. On a $1,082.50 inclusive price, dividing by 1.0825 gives the correct net of $1,000. Subtracting 8.25% would give $993.19 — wrong by $6.81.
How US sales tax works
The United States has no national sales tax. Rates are set by states, counties, cities and special districts, and they stack. A purchase in Chicago pays Illinois state tax plus Cook County plus the city plus a regional transit authority — over 10% combined.
| State | State rate | Average combined |
|---|---|---|
| California | 7.25% | 8.85% |
| Texas | 6.25% | 8.20% |
| New York | 4.00% | 8.53% |
| Florida | 6.00% | 7.00% |
| Illinois | 6.25% | 8.86% |
| Washington | 6.50% | 9.38% |
| Tennessee | 7.00% | 9.55% |
| Louisiana | 5.00% | 9.56% |
| Delaware | 0% | 0% |
| Oregon | 0% | 0% |
| Montana | 0% | 0% |
| New Hampshire | 0% | 0% |
Five states levy no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon — though Alaska permits local sales taxes. Rates change, so verify with your state revenue department for anything official.
Sales tax, VAT and GST
They tax consumption but collect it differently.
| US sales tax | VAT | GST (India) | |
|---|---|---|---|
| Collected at | Final sale only | Every stage | Every stage |
| Business credit | Exemption certificates | Input tax credit | Input tax credit |
| Shown in price | No — added at checkout | Yes — legally required | Yes — legally required |
| Typical rate | 0% – 10% | 17% – 27% | 0%, 5%, 12%, 18%, 28% |
| Set by | State and local | National | National, split centre/state |
For Indian GST with the CGST, SGST and IGST split, use the GST calculator. For percentage-off calculations, see the discount calculator.
Frequently asked questions
How do I remove sales tax from a total?
Divide the total by (1 + rate ÷ 100). At 8.25%, divide by 1.0825. The tax is then the total minus that result.
Subtracting the percentage from the inclusive total gives the wrong answer, because the tax was calculated on the smaller pre-tax figure.
Which US states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax. Alaska allows local jurisdictions to levy their own, so some Alaskan purchases are still taxed.
Is sales tax charged on the discounted price?
Yes. Tax applies to the amount actually paid, so a discount reduces the tax as well.
Manufacturer coupons are treated differently in some states — because the retailer is reimbursed, tax may be charged on the pre-coupon price.
Do I pay sales tax on online purchases?
Usually yes. Following the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax once they exceed an economic nexus threshold.
Most large online retailers now collect tax in every state that levies one.