BusinessHABTips on When is Tax Day : It’s really important to know how much an item is going to cost before you purchase it.
It’s not as easy as just looking at the price tag; sales tax must be calculated in order to determine the total cost.
Sales tax rates are increasing, which makes the tax impact on a purchase more significant.
Use these tips to learn how to calculate sales tax on your retail purchases.
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Tips on When is Tax Day
1. Multiply the cost of an item or service by the sales tax in order to find out the total cost.
2. Calculating Sales Tax
Change the sales tax into decimal form. For instance:
7.5% sales tax becomes .075 in decimal form
3.4% sales tax becomes .034 in decimal form
5% sales tax becomes .05 in decimal form
Formula: Item or service cost x sales tax (in decimal form) = total sales tax.
Sample calculation: $60 (item cost) x .075 (sales tax) = $4.50 total sales tax
Tips on When is Tax Day
3. Once you’ve calculated sales tax, https://businesshab.com/make sure to add it to the original cost to get the total cost.
If the total sales tax is $5 and your original item cost was $100, your total cost will be $105.
4. Try this example.
Solution
Convert the percentage sales tax into decimal form: 2.9% becomes .029.
Multiply it out: $25 x .029 = $.73, or $25.73 total cost
5. Try another example.
Solution
Convert the percentage sales tax into decimal form: 7% becomes .07.
Multiply it out: $300 x .07 = $21, or $321 total cost
6. Try a third example.
Solution
Convert the percentage sales tax into decimal form: 6.25% becomes .0625.
Multiply it out: $15,000 x .0625 = $937.5, or $15,937.5 total cost
Tips on When is Tax Day
7. De-calculate” by working backward if you know the original cost of the item.
You can work backwards to figure out the sales tax rate
Example
Let’s say you bought a computer, listed at $1,200, and the total bill came out to $1,266, meaning that the sales tax was $66. What is the sales tax rate?
Take the tax rate and divide it by the original price: $66 ÷ $1,200 = .055
Convert the decimal into a percentage by moving the decimal point two places to the right: .055 becomes 5.5%
Your original sales tax rate is 5.5%
8. Know that some American states do not have sales tax.
These states currently include:
- Delaware
- New Hampshire
- Montana
- Oregon
- Alaska
9. Know that states levy different taxes for different goods.
A state or district, such as District of Columbia, may have a general sales tax of 6%, but set the tax rate on liquor and prepared food at 10%.
- New Hampshire, for example, has no general sales tax but still taxes restaurants, food services, hotels, room rentals, and motor vehicle rentals at 9%.
- Massachusetts, for example, only starts counting sales tax associated with clothing when the bill exceeds $175. So if you buy under $175 worth of clothing in Massachusetts, the state government won’t tax it.
Tips on When is Tax Day
10. Be sure to check with your local state and city when calculating sales tax.
We don’t often talk of “city sales tax,” but it’s there.
Most people, however, just lump it in with state sales tax.
If you want to know exactly how much money you’ll pay in taxes for a certain item,
for more information.
11. More tips
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