How to you "back out" sales tax?

Answer 1

If you know the subtotal before tax, you can simply subtract that from the grand total and the difference is sales tax. But I'm going to guess that you already knew that and it isn't an option, so I assume you are asking, "If I know the total price (including tax) and the sales tax rate, how do I figure out how much of the total price is the sales tax itself?"

Stay with me here!! While my answer looks much more complicated than it really is, the calculation is pretty easy after you've done it once or twice. The solution is to:

~ Step 1: divide the after-tax total by 1.xxxx, where xxxx is the sales tax rate (percentage expressed as a decimal), to find the pre-tax subtotal
~ Step 2: subtract the pre-tax subtotal from the grand total to find the sales tax

To state that in a formula, if:
... the grand total including tax is "T" (known amount)
... the pre-tax subtotal is "S" (unknown amount)
... the sales tax rate is "R" (a.bc% expressed as a 0.0abc) (known rate)
... and the sales tax amount is "TX" (unknown amount), then

~ Step 1: T / (1 + R) = S
~ Step 2: T - S = TX

If that was utterly confusing, here is an example: let's say you only know the grand total of $47.74 ("T") and the sales tax rate of 8.5% or 0.085 ("R").
~ Step 1: If we divide $47.74 ("T") by 1.085 (1 plus 0.085 ["R"]), we get a subtotal of $44 ("S").
~ Step 2: $47.74 ("T") minus $44 ("S") equals sales tax of $3.74 ("TX").

Then it is easy to cross check: your subtotal of $44 times 0.085 equals $3.74.

My apologies that this is so long and convoluted (can you tell that I'm a tax preparer and not a math teacher?). Hopefully you'll be able to make sense of it! :-)

Answer 2

In general, most of people consider "back out' sales tax as- to withdraw from sales before completion of the transaction. Whenever you get your bill, you already "complete" the sales transaction. Thereby, the buyer must return the goods, get a refund, and repurchase the item. And that is the proper accouting way of bookkeeping.

OK. There are several way to avoid sales tax (may not be legal). The most common ways are:

1. You may ship out of states or internationally. (Buy at amazon.com etc.)
2. You may obtain a seller-permit
3. Buy at Sales Tax Holiday
4. Buy and live at the state that has no sales tax (i.e. Oregon)
http://www.oregon.gov/DOR/salestax.shtml


Remember, you may still need to pay use tax in some of the states.

So you may live in the state of Washington (no state income tax) and shop at Oregon (no sales tax). But the gas will kill the deal :)

Answer 3

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A lot of them will have tolls on their highways to get into the state as well as exit it. That way they are not taxing the people that live in the state the most; however, anyone traveling through is making up the difference in the taxes. The 16th Ammendment was ratified in the early 1900's. The way the Constitution was written was that no taxes were ever to be taken from a man's working pay. The taxes for the whole country were to be mostly obtained through open trade with imports. That's the way our forefathers felt it was fair anyway. Also, our forefathers only felt that landowners be the only Americans to pay taxes. There were not a whole lot of people who actually owned the land they lived on. They were share croppers and shared their profits with the wealthy landowners. So the working poor didn't pay taxes; however, the wealthy did because they could afford to. Needless to say, the majority in Congress was Republican as was the president at that time. So that is when TAXES were taken out of every person's paycheck and (I think) the IRS was born. I find it ironic how the Republican Party calls the Democratic Party the Party of tax increases when history shows us it was the GOP who were responsible for the ratification of the 16th ammendment. Their friends were the ones having to pay the most in taxes as well as the majority of the Congress. Also, the lobbyists were hard at work even back then. As a matter of fact, the Congress is addressing HR 25 which would repeal the 16th Amendment where no one would pay tax on their income as well as there would no longer be a need for the IRS. By doing this, it would mean the corporations, importers, and other very profitable companies would pay their fair amount of taxes and then all of the people would have a chance for a better life. Not just the same people getting richer, and the working poor continuing to live week by week. I know if my husband's check didn't have taxes taken out, we would be living in a whole other class. Sign the petition from the URL below if you agree. I find it hypocritical that even on one of the GOP's biggest board sites (see below url), they are for so much taxing of the American People. I thought they were the party of less taxes? Less taxes on the corporations is all they care about.

Answer 4

Back Out Tax

Answer 5

Let's say the sales tax rate is 7.75% and you paid $13.26 for something including sales tax. Divide $13.26 by 1.0775 and you get the price without sales tax = $12.306 or $12.31. So the sales tax was $13.26 - $12.31 = $0.95.

Answer 6

Very easy, the honest way: DON'T BUY.