Formulas
- Adding tax: tax = net × rate ÷ 100; total = net + tax
- Removing tax: net = total ÷ (1 + rate ÷ 100); tax = total − net
A common mistake is to take the rate off a tax-inclusive price. With 20% VAT, a 120 price is 100 net plus 20 tax — subtracting 20% of 120 (24) would give the wrong net of 96.
Sales tax vs VAT
US sales tax is added at the till and varies by state and city, so shelf prices usually exclude it. VAT (used in the UK, EU, Korea and many other countries) is charged at each step of the supply chain, and consumer prices normally include it.
Rounding rules differ between countries and accounting systems, so totals may vary by a cent.