written by: W. A. Swan•edited by: John Garger•updated: 6/14/2011
When you go shopping, you may be surprised that the total is higher than you anticipated. This is because there is sales tax collected on many items and services. The amount of sales tax depends on where you live. How do you figure out the sales tax for your purchases? By using a simple equation.
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Sales tax is the figure used by local and state governments to raise revenue from the sale of specific retail goods or services. Sales tax is added at the end of the total sale. Most people already know this. But a far lesser number understand how to calculate sales tax on their purchases. So, you probably ask how do I figure sales tax? You need to know when to expect to pay it first.
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When to Pay
Most states consider items necessary to basic living as non-taxable. According to the Texas Comptroller of Public Accounts this includes baby products, bakery items, unprepared foods, any item bought on an EBT card, medications and frozen items. Many services such as those conducted on property or on taxable items are also subject to sales tax according to the Pennsylvania Department of Revenue. Clothing is one of those items that may or may not be subject to sales tax depending on the state. In Pennsylvania, clothing isn’t taxable but in Texas it is.
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Applying Sales Tax to the Sale
How do I figure sales tax? Sales tax is calculated as “so many cents on the dollar." Using Pennsylvania as an example, this translates into six cents for every dollar. In New York, this calculates to eight cents per dollar. Each state has different rates and regulations with regard to sales tax. Your state tax office or department of revenue has information about your local tax rate. If you live in a major metropolitan area such as Pittsburgh or New York City, there is also an additional percentage of sales tax applied over the state sales tax. City government offices and websites have this information.
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Calculating Sales Tax
How do I figure out sales tax? The method is a simple mathematical statement. Here’s how it’s done. Find out the percentage (asking a sales clerk should get you the information). Change the percentage to a decimal number. In the example below 8% is expressed as .08; sales tax always has two places after the decimal point.
Let’s set the sale price at $9.95 and the sales tax at 8%. You change the percentage into a decimal number, so 8 percent becomes .08. Multiply the sales price by the sales tax to determine the amount of tax for that purchase.
$9.95 x .08 = .796 (round the amount up to .80)
So the tax is 80 cents. Add that amount to the purchase price to determine the total cost. This makes the total purchase $10.75 ($9.95 + $.80 = $10.75)
This calculation works for any tax rate in any state. If sales tax increases, plug in the new numbers to get the relevant answer. If your city charges additional tax, calculate that tax separately from the state sales tax and then add the two numbers to the sales price. Here’s an example.
$9.95 x .08 = .796 (state tax) $9.95 x .01 = .099 (city sales tax)
You then add .80 cents for the state and .10 cents for the city to the original purchase price.
$9.95 + .80 + .10 = $10.85
Always add the state sales tax first because this applies to all states. The city tax only applies to cities that collect it.