How this calculator works
Two directions, one calculator. "Add tax" answers what a listed net price will cost at checkout — the everyday US situation, where shelf prices exclude sales tax. "Extract tax" answers how much tax is inside a price that already includes it — the everyday VAT/GST situation in Europe and much of the world, and what you need for expense reports and invoices.
The extraction direction is where people slip: taking 25% of the gross price overstates the tax, because the percentage was applied to the smaller net amount. Dividing by 1.25 undoes it correctly.
The formulas
Add: tax = net × (rate ÷ 100); gross = net + taxExtract: net = gross ÷ (1 + rate ÷ 100); tax = gross − netThe two operations are exact inverses — adding tax and then extracting it at the same rate returns the original price to the cent.
Worked example: extracting 25% VAT
- A receipt shows 125.00 with 25% VAT included.
- Net price: 125 ÷ 1.25 = 100.00.
- VAT amount: 125 − 100 = 25.00.
- Common mistake: 25% of 125 = 31.25 — wrong, because the 25% was charged on 100, not 125.
Frequently asked questions
What is the difference between sales tax and VAT?
Sales tax (US) is added once, at the final sale, on top of listed prices. VAT/GST is charged at each stage of the supply chain and is already included in consumer prices. The arithmetic on a receipt is the same; only the direction you usually calculate differs.
Why can't I just take the percentage of the gross price?
Because the rate was applied to the net price. In a 125.00 gross at 25%, the tax is 25.00 (25% of net 100), not 31.25 (25% of gross). Divide by 1 + rate/100 first.
Which rate should I enter?
The combined rate that actually applies to your purchase. In the US that is state plus local (New York City totals 8.875%, for example); for VAT use your country's rate for that goods category — many countries have reduced rates for food and books.
Does the calculator round like a cash register?
It shows exact values rounded to two decimals at display. Registers legally round per line item or per receipt depending on jurisdiction, so totals can differ by a cent on multi-item purchases.
How do I calculate the tax rate itself if I know the price before and after tax?
Subtract the net price from the gross price to get the tax amount, then divide that tax amount by the net price and multiply by 100. Using the worked example on this page, a 125.00 gross price with a 100.00 net price gives a tax amount of 25.00, and 25 ÷ 100 × 100 = 25%, matching the 25% VAT rate used in that example.