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MathThe shelf says $100. The register says $107.25. That gap is sales tax — a percentage of the price added at checkout — and while the cash register computes it automatically, understanding the math helps you budget precisely, spot pricing tricks, and work backwards from totals.
This guide covers the forward formula, the reverse trick for extracting pre-tax prices, and how discounts and tax interact.
Try it yourself: Add tax to any price in one step. Percentage Calculator →
The one-step forward formula
Total = price × (1 + tax rate)
— tax rate as a decimal: 7.25% → 0.0725 → × 1.0725 —
— tax rate as a decimal: 7.25% → 0.0725 → × 1.0725 —
A $100 item in a 7.25% tax area: 100 × 1.0725 = $107.25. The "1 +" is the shortcut that folds the original price (1) and the tax (0.0725) into a single multiplication. If you'd rather see the tax separately: 100 × 0.0725 = $7.25 of tax, then add.
A $59.99 item at 8.875%: 59.99 × 1.08875 = $65.31 after rounding. Retailers round to the nearest cent — tax is technically calculated per item in some jurisdictions and on the subtotal in others, which explains penny-level discrepancies between stores.
Working backwards: the pre-tax price trick
You paid $107.25 and want to know the shelf price. Division undoes the forward multiplication:
Price = total ÷ (1 + tax rate)
— $107.25 ÷ 1.0725 = $100 —
— $107.25 ÷ 1.0725 = $100 —
This is genuinely useful: splitting a restaurant bill's tax evenly, checking whether a "tax included" price is really a deal, or reverse-engineering a receipt that only shows the total.
Discounts first, tax second
In nearly all US jurisdictions, sales tax applies to the discounted price — what you actually pay before tax. This makes stacked deals better than they look:
- Wrong way: $100 + 7% tax = $107, minus 20% = $85.60
- Right way: $100 − 20% = $80, plus 7% tax = $85.60
Wait — same answer? For a single discount it actually is the same, because multiplication commutes: 100 × 0.8 × 1.07 = 100 × 1.07 × 0.8. The ordering only matters conceptually: the store taxes what you pay, not what you saved.
Why rates vary block to block
US sales tax stacks: state rate + county rate + city rate + sometimes special district rates. A 6% state base can become 9.5% three miles across a county line. Several states — Delaware, Montana, New Hampshire, and Oregon among them — have no statewide sales tax at all, which is why cross-border shopping is a real phenomenon.
And some categories are exempt or reduced in many states: groceries and clothing under a threshold often escape tax, while prepared food, alcohol, and cigarettes get taxed harder. If your mental estimate is consistently high at the grocery store, exemptions are probably why.
Frequently asked questions
Multiply the price by 1 plus the tax rate as a decimal. For a $100 item at 7.25%: 100 × 1.0725 = $107.25. The "1 +" shortcut folds the original price and the tax into a single step.
Divide the total by 1 plus the tax rate as a decimal. A $107.25 total at 7.25% tax: 107.25 ÷ 1.0725 = $100. This is the inverse of the forward calculation.
In nearly all US jurisdictions, tax applies to the discounted price — the price you actually pay before tax. A $100 item at 20% off in a 7% tax state costs 80 × 1.07 = $85.60.
US sales tax stacks: a state rate plus county and city add-ons. That is why two stores a few miles apart can charge different totals. Several US states have no statewide sales tax at all — Delaware, Montana, New Hampshire, and Oregon among them.
Disclaimer: Calculator content is for education only — examples are illustrative and rounded; double-check figures used in financial or contractual decisions. Tax rules vary by jurisdiction.