Calculation of sales tax is very easy if you know the concept of percentage. Sales tax is a type of indirect tax that a government charge from the citizens. Sales taxes are different for different countries. Tax is nothing but collecting money from the citizens by the government on the purchase of goods or products. In this article, we will discuss clearly how to calculate the sales tax with suitable examples along with Sales Tax and Value Added Tax.
Sales Tax – Definition
Sales tax is a form of indirect tax collected by the government from their citizens for the sale of goods and services. The customer who buys the product will pay the sales tax.
What is the formula for Calculating Sales Tax?
The tax is related to the selling price and the income of the taxpayers. Here we will explain how to calculate sales tax. In order to find the sales, we have to know what the sales tax is. It is a small percentage of the total selling price of the products or goods. The sales tax is the final price the customer pays for the goods. We can find the sales tax if you know the selling price, market price, and the rate of sales. The formula to calculate the sales tax are given below,
Selling price S = P(1 + r/100)
sales tax = S – P = Pr/100
Here
P is the printed price (or) market price of a commodity.
% r is the rate of sales
S is the selling price
Sales Tax Calculation Examples
Example 1.
A washing machine is marked for sale at 16600 inclusive of sales tax at the rate of 10%. Calculate the sales tax on the washing machine.
Solution:
Let the price of the washing machine without sales tax = P.
The selling price S = 16600 and the rate of sales tax ® = 10
S = P(1 + r/100)
16600 = P(1 + 10/100)
P × 11/10 = 16600
Therefore, P =16600 × 10/11 = 15090
Therefore, the sale tax = Selling price – Printed price
= 16600 – 15090
=1510
Therefore sales tax of a washing machine is Rs 1510
Example 2.
If the rate of sale tax increases by 6%, the selling price of an article goes up by 48. Find the marked price of the article.
Solution:
Let the marked price = P(1 + r/100)
When the rate of sales tax increases by 6%
The selling price = p(1 + (r + 6)/100)
From the equation,
P(1 + (r + 6)/100) – P((1 + r)/100) = 48
6P/100 = 48
6P = 48 × 100
6P = 4800
P = 4800/6
P = 800
Therefore, the marked price of the article is 800.
Example 3.
Rahul bought flowers for 513, which includes sales tax. If the listed price of the flowers is 480 what was the rate of sales tax?
Solution:
Given that
The printed price P = 480, the selling price S = 513.
We know that
If the rate of sales tax be r% then,
S = P(1 + r/100)
513 = 480(1 + r/100)
1 + r/100 = 513/480
Therefore, r/100 = 513/480 – 1
r/100 = 33/480
r = 6.87
Therefore, the rate of sales tax was 6.87%
Example 4.
The printed price of a car is $240. The rate of sales tax on it is 5%. Find the price at which the car can be purchased.
Solution:
Given that
The printed price P = $ 240
The rate of sales tax = 5%, therefore r = 5
Here, the selling price S = P(1 + r/100)
= $ 240 × (1 + 5/100)
= $ 240 × 105/100
= $ 240 × 1.05
= $ 252
Therefore, the car can be purchased for $ 252.
Example 5.
John purchased an article for 600 including Sales Tax. If the rate of Sales Tax is 6%, find the sale price of the article.
Solution:
Let us consider sale price of the article be x
John purchased an article for 600 including sales tax
Therefore, x + 6% of x = 600
x + 6x/100 = 600
106x/100 = 600
x = 600 × 100/106x
x = 566.03
Therefore, the sale price of the article = 566.03
FAQs on Calculating Sales Tax
1. What is the formula for calculating sales tax?
The formula for calculating sales tax is total sale amount = selling price + sales tax
2. What is a sales tax and how do you calculate it?
Sales tax is nothing but collecting the amount for buying the goods. Take the price of a taxable product or service and multiply it by the sales tax rate.
3. What does sales tax mean?
Sales tax is an amount of money, calculated as a percentage, that is added to the cost of a product or service when purchased by a consumer at a retail location.