how-do-i-figure-sales-tax

How Do I Figure Sales Tax

Written by   (author of Obvious Conclusions)

Many people ask, “How Do I Figure Sales Tax?”. In this article we will explore how to calculate sales tax so that you never again have to ask that question.

I will take a unique strategy with this question. Often, I hit the Internet to find the absolute best videos on a topic and bring them to you all in one place. This is why we are your home for how to videos…because you get all the great videos on a topic in one place.

But, first, I will answer the question in the first person (by telling you personally how I do it) and then share with you many Internet videos of how other people calculate sales tax.

How Do I Figure Sales Tax

Ok, let’s start with me and I will show you how I calculate sales tax. This tactic especially comes in handy when you find yourself without a calculator. It allows you to do very good approximations of sales tax without a significant amount of effort.

Also, I travel a lot, and it helps to know the various sales taxes in certain states. Wikipedia breaks down state tax rates here.

I lived in California for many years, which was great, except for the sales tax. At 8.25%, California has the highest sales tax of all the states. Since I lived there, I will use California as an example.

Let’s assume we want to buy a relatively fancy new mountain bike and the price of this bike is $1,767 dollars. (When amounts are large, sales tax is really important because it is so much more. I remember when I bought my first car and, after I negotiated the price down to $20,000, the real price amounted to more than $21,500!)

So, we are in the bike store, sans calculator, and we want to know how much sales tax that we will have to pay on our new bike that costs $1,767. Here’s is how I approximate the sales tax on everything in California.

Steps to Manually Calculate Sales Tax

  • Step 1: Get 10% of the value (move the decimal point 1 spot to the left).
  • Step 2: Get 1% of the value (more the decimal point 1 spot from the 10% value).
  • Step 3: Optional: If you want to get real specific, get the 50% and 25% values of the 1%.
  • Step 4: Subtract the values of Steps 2 and 3 from Step 1 to get calculate your specific sales tax.

(NOTE: In some states where the state tax is closer to 5%, it is easier to base your numbers on the 5% value and then add or subtract accordingly.)

Manually Calculating State Sales Tax: Real World Example

Step 1: Get 10% of the Value
First, I ask myself, what is 10% of the total cost? This is always easy because all that you have to do is move the decimal point one place to the left. Now, we have the number of $176, which is 10%. Thus, at a California sales tax of 8.25%, we have already gotten pretty close to the sales taxes that we will have to pay.

Step 2: Get 1% of the Value
But, if we want to take it further, we keep using this 10% as our base #. Thus, in California, we need to pay 1.75% less than 10%. Well, to figure out 1% of the total cost, we simply move the decimal point one more place to the left on our 10% figure, which gets us to $17. Now, we know that 9% is roughly $176-$17, which is $159.

Step 3: Get .5 % and .25% If We Want Real Specifics
We still have that small matter of the .75% that we need to subtract. I usually don’t go this far as you can already have a real good sales tax estimate based on what you have done. But, if we want to go further and get more exact, it’s easy. We know that 1% is roughly $17. Thus, .5% of the total cost will be 50% of one percent, which is $8.50. And .25% of the total cost will be 1/2 of the .5% which we just calculated, or $4.25. Thus, the .75% equals $8.50 + $4.25, which is $12.75.

Step 4: Subtracting The Sum of Steps 2 and 3 from Step 1

So, since California has a sales tax of 8.25% we are going to subtract 1.75% from the 10% and we will get very close to our sales tax without having a calculator. Thus, we have our 1.75% ($17 + $12.75), $29.75, which we will subtract from $176 which gives us a total sales tax of $146.25.

Let’s check it now with a calculator. The actually state sales tax in California for this bike of $1,767 would be $145.78. Thus, our mental calculations only leave us off by .47 cents. Not bad, huh?

How To Calculate Sales Tax With a Calculator

This is very easy to do. We will take a look at how to calculate sales tax in two ways. In the first way, we will show you how to quickly come up with the amount of sales tax that you will have to pay. In the second way, we will show you how to quickly figure out the total price that you will have to pay for the item, which is probably what you really want to know, right?

Ok, first, calculating the sales tax. To do this, we simply get the decimal version of the your sales tax percentage. To do this, move the decimal place over 2 spaces to the left and add a zero before the 8. So, in California the decimal version of the 8.25% sales tax is .0825. To come up with the sales tax, simply multiply .0825 by the total price.

Then, to get the total price that you will have to pay, you can add this number to the price of the item.

But there is an easier way to come up with the total price that you will pay if you are using a calculator. To do this, simply add the number 1 before the percentage you just calculated, which would give you 1.0825. Now, multiply the price of the item by 1.0825 and you will get the price that you will have to pay for the item.

How Do I Figure Sales Tax: How To Videos

Well, if you prefer videos, here are several how to videos on how to calculate sales tax that you may enjoy. Simply click the links to view the videos in their own window.

Sales Tax with Jimmy Chang

If you are going to watch a video, this one is very good. Jimmy Chang, math professor, illustrates with enthusiasm how to figure a 7% sales tax. This video is 2 1/2 minutes and taught very well.

Doing Sales Tax Calculations

In this 2 1/2 minute video, we have someone who shows us how to figure sales tax on a whiteboard. In the video, this somewhat geeky instructor does multiplication by hand to figure out sales tax and total price.

Figuring Sales Tax: Articles

For more outside resources, the following 2 articles provide good textual information on calculating sales tax.
Calculating Sales Tax Information: This page from eHow illustrates in a simple 6 step process how to calculate sales tax

Calculating Sales Tax Examples: This page comes from basic mathematics and it provides several examples and exercises where you can test the skills that you have learned about how to figure sales tax.

How Do I Figure Sales Tax: Summary

On this page, we have provided all the best articles and videos on how to calculate sales tax.

This is an important life skill to have as we are always needing to know the sales tax as we buy an item, especially an expensive item!

Remember, sales tax is different in every state. To determine the particulars about sales tax in your state, go to Google and type in the following: “sales tax in [insert your state here]”. This will normally bring up your states website first and they will have authority information on the tax rates in your state.

When you have that information, you will now know how to calculate sales tax in your state and, hopefully, you will never again have to ask, “How Do I Figure Sales Tax?:)

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Richard Cummings

Richard Cummings is writer, traveler, and web content developer. He creates fun, informative how to articles for this site and exercises his creative writing prerogative at ARichIdea.com.

Get your copy of his latest book entitled Obvious Conclusions, stories of a Midwestern emigrant influenced and corrupted by many years living in San Francisco and abroad. It just received its first outstanding review "...reminiscent of David Sedaris or Augusten Burroughs" on Amazon UK.
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