Understanding The Sales Tax Calculator
Using our sales tax calculator is easy. All you need to do is put the pre-tax amount, your state, and tax percentage for the final result. Here is an explanation of these inputs for a better understanding:
Pre-Tax Amount
The pre-tax amount is the price of the services/products without any tax addition. In simpler terms, this is the amount at which the business prices its services or product.
State and Tax Percentage
There are different state and local tax rates for U.S. states, so you will need to put both details separately. The sales tax percentage for each state is mentioned below for the user’s reference. So, you can use this information to calculate the after-tax price.
After putting all the information in the calculator, you will get the after-sales tax price.
What Is Sales Tax?
Sales tax is an indirect tax charged to the customers. It is imposed by the government on various goods and services offered by certain businesses.
Moving forward, in the next section, you will get to know about the average local sales tax rate in the U.S. and local tax rates.
Sales Tax In the United States
The United States has its tax system and rate charges. Depending on your location, the sales tax can range from 0% to 16%, which is dependent on the nature of goods and services. However, there are exemptions on certain products.
Here is the list of the 50 U.S. states and their sales tax percentage for the year 2023:
| State | State Tax Rate | Local Tax Rate (Average) | Combined Rate (Average) |
|---|---|---|---|
| Alabama | 4.00% | 5.25% | 9.25% |
| Alaska | 0.00% | 1.76% | 1.76% |
| Arizona | 5.60% | 2.77% | 8.37% |
| Arkansas | 6.50% | 2.96% | 9.46% |
| California | 7.25% | 1.57% | 8.82% |
| Colorado | 2.98% | 4.88% | 7.78% |
| Connecticut | 6.35% | 0.00% | 6.35% |
| Delaware | 0.00% | 0.00% | 0.00% |
| D.C. | 6.00% | 0.00% | 6.000% |
| Florida | 6.00% | 1.02% | 7.02% |
| Georgia | 4.00% | 3.40% | 7.40% |
| Hawaii (c) | 4.00% | 0.44% | 4.44% |
| Idaho | 6.00% | 0.02% | 6.02% |
| Illinois | 6.25% | 2.57% | 8.82% |
| Indiana | 7.00% | 0.00% | 7.00% |
| Iowa | 6.00% | 0.94% | 6.94% |
| Kansas | 6.50% | 2.16% | 8.66% |
| Kentucky | 6.00% | 0.00% | 6.00% |
| Louisiana | 4.45% | 5.10% | 9.55% |
| Maine | 5.50% | 0.00% | 5.50% |
| Maryland | 6.00% | 0.00% | 6.00% |
| Massachusetts | 6.25% | 0.00% | 6.25% |
| Michigan | 6.00% | 0.00% | 6.00% |
| Minnesota | 6.875% | 0.61% | 7.49% |
| Mississippi | 7.00% | 0.07% | 7.07% |
| Missouri | 4.225% | 4.11% | 8.33% |
| Montana | 0.00% | 0.00% | 0.00% |
| Nebraska | 5.50% | 1.45% | 6.95% |
| Nevada | 6.85% | 1.38% | 8.23% |
| New Hampshire | 0.00% | 0.00% | 0.00% |
| New Jersey | 6.625 | --0.03% | 6.60% |
| New Mexico | 5.00% | 2.72% | 7.72% |
| New York | 4.00% | 4.52% | 8.52% |
| North Carolina | 4.75% | 2.24% | 6.99% |
| North Dakota | 5.00% | 1.97% | 6.97% |
| Ohio | 5.75% | 1.49% | 7.24% |
| Oklahoma | 4.50% | 4.48% | 8.98% |
| Oregon | 0.00% | 0.00% | 0.00% |
| Pennsylvania | 6.00% | 0.34% | 6.34% |
| Rhode Island | 7.00% | 0.00% | 7.00% |
| South Carolina | 6.00% | 1.43% | 7.43% |
| South Dakota | 4.50% | 1.90% | 6.40% |
| Tennessee | 7.00% | 2.55% | 9.55% |
| Texas | 6.25% | 1.95% | 8.20% |
| Utah | 6.10% | 1.09% | 7.19% |
| Vermont | 6.00% | 0.30% | 6.30% |
| Virginia | 5.30% | 0.45% | 5.75% |
| Washington | 6.50% | 2.36% | 8.86% |
| West Virginia | 6.00% | 0.55% | 6.55% |
| Wisconsin | 5.00% | 0.43% | 5.43% |
| Wyoming | 4.00% | 1.36% | 5.36% |
Note: The average local rate of the cities is mentioned, however, it can vary according to the city, and zip code.
How Is Sales Tax Calculated?
Calculating the sales tax is easy after you know the sales tax rate of your state. The sales tax will vary depending on the customer’s bill. For instance, a customer who bought $500 worth of goods or services will need to pay more sales tax as compared to a customer who bought $150 worth of goods or services.
Here is the formula for calculating sales tax:
Sales Tax= Cost Of The Item/s * Sales Tax Rate
Here is an example of how to calculate the sales tax:
Suppose your business is in Southfield, Michigan, USA. The tax rate in the state is 6.00% (6%- Sales Tax and 0.00- Local Tax). Now, the customer’s bill comes out to be $500 before adding up the sales tax, so, here is how you will need to calculate it.
Sales Tax= $500 * 0.06
Sales Tax= $30
Amount After Sales Tax= $530
That means $30 is the sales tax that the customer will have to pay for the desired product or service.
Sales Tax Vs. Value-Added Tax
V/S
Sales tax and value-added taxes are indirect taxes, meaning you don’t pay this tax directly from your income. Instead, these taxes are levied on products and services, which customers must bear upon consumption.
They are often confused with each other, so here’s the difference discussed between both them:
Sales tax is collected from the end-user when they purchase certain goods or services from the buyers. It is given to the government after the final customer has received the goods or services.
While on the other hand, the sellers charge Value Added Tax (VAT) at every phase of the supply chain, and the price gets added for the end-customer. It gets paid by the suppliers, manufacturers, distributors, retailers, and the end-customers. The sales tax needs to be paid by the final customer, while all the buyers will have to pay VAT, but the economic burden falls on the final consumer.
FAQs
How do you calculate 7% sales tax?
Calculating sales tax on a good or service is easy. You must multiply the product/goods cost by the tax rate. For instance, if you have a business in a state which has 7% sales tax and you sell tables worth $100 each, you will multiply $100 by 7%, which is $7, the sales tax amount.
How can I calculate the tax rate?
The formula you need to use for calculating the tax rate is Total Tax divided by Taxable Income.
How do I know if my business is required to collect sales tax?
Your business must pay a sales tax if it has a sales tax nexus, presence, or location. It can vary depending on the residing state and zip code.