Sales tax and VAT explained
Sales tax and value-added tax (VAT) are percentages added to the price of goods and services. In many countries prices shown to consumers already include VAT, while in the United States sales tax is usually added at the register.
Adding tax
Multiply the net price by the tax rate to get the tax, then add it: gross = net × (1 + rate).
Removing tax
To find the price before tax from a total, divide by (1 + rate): net = gross ÷ (1 + rate). A common mistake is to subtract the rate directly from the total, which gives a wrong result.
Examples
- €100 + 21% VAT = €121.
- €121 total with 21% VAT → €100 net and €21 tax.
Frequently asked questions
Why not subtract 21% from the total?
Because the tax was calculated on the net price, not on the total. Divide by 1.21 instead.
Which rate should I use?
Use the rate in force where you buy or sell. Rates differ by country, region and product.
Is this tax advice?
No. It is a calculation tool only.