Sales Tax Calculator
The Sales Tax Calculator can compute any one of the following, given inputs for the remaining two: before-tax price, sale tax rate, and final, or after-tax price.
A sales tax is the money paid to a government for the sales of certain goods and services. Usually the laws let the seller to collect the tax from the consumer when purchasing. Most countries in the world collect sales tax. In some countries, the sales tax is called value added tax (VAT). In some countries, the listed prices for the goods and services are before tax value. When purchasing, the sales tax will be added to the listed price. In other countries, the listed prices are after tax final value, which includes the sales tax. The sales tax rate for EU countries ranges from 15% (Luxembourg) to 27% (Hungary).
U.S. Sales Tax
In the United States, sales tax at the federal level does not exist. At the state level, all (including District of Columbia, Puerto Rico, and Guam) but five states do not have statewide sales tax. These are Alaska, Delaware, Montana, New Hampshire, and Oregon. States that impose sales tax will have different rates, with the addition of local or city sales tax in most states. Unlike value-added tax (which is not imposed in the U.S.), sales tax is only enforced on retail purchases; most transactions of goods or services between businesses are not subject to sales tax.
In the U.S., sales tax can be deductible when filing tax return (Form 1040, and itemize deductions on Schedule A). There are options to claim either state and local income taxes or state and local sales taxes (but not both). Saving receipts throughout the year can add up the total amount of sales taxes paid in order to claim that amount if it is more than the state and local income taxes. Otherwise, it is still possible to claim state and local income taxes. Fill out the worksheet and use the optional general sales tax tables in the Instructions for Schedule A (Form 1040), or use the Sales Tax Deduction Calculator provided by IRS.
The sales tax rate in the United States ranges from 0% to 16% depending on the states and the type of goods and services. In Texas, prescription medicine and food seeds are exempt from taxation. Vermont has a 6% general sales tax, but an additional 10% tax is added to purchases of alcoholic drinks that are immediately consumed. These are only several examples of differences in taxation in different jurisdictions. Rules and regulations regarding sales tax varies widely from state to state. The following is an overview of the sales tax rates for different states in U.S.
|State||General State Sales Tax||Max Tax Rate with Local/City Sale Tax|
|District of Columbia||5.75%||5.75%|
Sales tax has something of a controversial history in the U.S. After all, when the United States was still a British Colony in the 18th century, the English King's imposition of a sales tax on tea led directly to the American Revolution!
Americans have been uneasy with sales tax ever since then, and this is perhaps why there has never been a federal sales tax. The first sales tax in the modern sense was imposed in the state of Pennsylvania in 1821 – it raised a lot of problems. Then, in 1930, the state of Kentucky imposed a very unpopular tax specifically on retailers.
However, it is currently imposed in most states as a necessary means to raise revenue for the government. It has, in the modern era, caused far less controversy than income-tax measures. State sales taxes alone raised $794.6 billion in 2013, while the IRS takes in just about $900 billion in income tax.
Across the U.S., on average, sales tax now takes away about 2 percent of personal income. Sales tax provides nearly one-third of state government finance and ranks second to the income tax in importance as a source of state finance. Reliance on the sales tax varies widely by state. Sales taxes are much more important in the south and west than in New England and the industrial Midwest. Florida, Washington, Tennessee, and Texas all generate more than 50 percent of their tax revenue from the sales tax, and several of these states raise nearly 60 percent from the sales tax. New York, on the other hand, only raises about one-fifth of its revenues from the sales tax.
Value-Added Tax (VAT)
Outside of the U.S., sales tax is commonly replaced by value-added tax, or VAT, which is an indirect tax that is imposed at different stages of the production of goods and services whenever value is added. Everything in the supply chain from wholesalers, distributers, suppliers, manufacturers, and retailers may pay VAT, not just the end consumer. It can be calculated as the sales price minus the costs of materials or parts used that have been taxed already.
A 1979 study published by the Tax Foundation offered some insight into arguments for or against VAT as compared to a single tax. Perhaps the greatest benefit of taxation via VAT is that the stringent measures disallows or makes evading tax difficult. Also, there are stronger incentives to control costs when all businesses in the supply chain are taxed. Compared to a regular sales tax, VAT has the ability to raise more revenue given a lower rate. On the other hand, VAT tends to be regressive; that is, it takes proportionately greater amounts from lower incomes. Also, the cascading tax is harmful to new and marginal business activities, likely to set off inflationary tendencies, and is detrimental to exports.
VAT is enforced in more than 160 Countries. Countries that impose VAT will also impose it on import and export goods.
Goods and Services Tax (GST)
The Goods and Services Tax (GST) is similar to VAT, an indirect sales tax applied to certain goods and services at every stage of the supply chain. Taxation across multiple countries that impose GST or VAT is so vastly different that neither can properly define them. The countries that define their "sales tax" as a GST are Spain, Greece, India, Canada, Singapore, and Malaysia.