Sales Tax Calculator

Sales tax collection is a requirement of many businesses that sell products and offer services. You are in charge of paying the sales tax to your state or local government after collecting it from clients. However, you must first learn how to calculate sales tax before you can begin to collect.

What is Sales Tax?

Customers are subject to a charge known as sales tax when they buy goods and services. It is a pass-through tax, which means you must collect it from clients and send the money to your state or local government. You do not contribute sales tax as the seller.

How much is sales tax, then? A customer's entire bill is subject to sales tax. The amount of sales tax is determined by the state, county, and city in which your company has a physical presence.

Do you need to collect sales tax?

If your company conducts business in a state that levies a sales tax, you are required to collect the tax. Sales tax is imposed by the majority of states.

How to calculate sales tax

A percentage of the total taxable purchase is used to compute sales tax. It is a one-time tax that is added on to final purchases at the point of sale. Consumers give vendors their money, and vendors give it to the government in the end.

An example of how to calculate sales tax
Consider, a vending machine where every item is subject to a 7% sales tax. The most recent month's receipts from the vending machines totaled $481.50. Therefore, $481.50 comprises both the money obtained from goods sales and the sales tax that was levied on those sales. Using algebra, we can determine how much of the $481.50 represents the actual sales amount and how much represents the sales tax on those items:

Suppose that S represents actual product sales (before sales tax) and that 0.07S represents the sales tax on actual product sales. We can write this as S + 0.07S = 1.07S = $481.50 since the genuine sales plus the sales tax equal $481.50.

By dividing $481.50 by 1.07, we may find S. The actual product sales came to $450 as a result. $31.50 ($450 X 0.7) is the 7% sales tax on the actual sales. Let's check if this adds up now: The sum of the vending machine receipts was $481.50, which was equal to $450 in goods sales plus $31.50 in sales tax.

Take an additional $31.50 in sales tax from the customer. After that, send the sales tax to the proper authority. For more details, get in touch with the government.

If you need help in calculating sales tax?  Freepion Free Sales tax calculator makes it easy for you. 

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CEO / Co-Founder

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