Sales tax
A sales tax is a tax that is paid for the sale of certain goods and services. In the United States, different states have different sales tax rates, and only 5 states (Alaska, Delaware, Montana, New Hampshire, Oregon) don't have sales taxes.
Sales tax rates are often expressed as a percentage, such as 8.25%, so understanding percentages allows you to determine how much items that incur a sales tax will actually cost.
Calculating sale price
Sale price refers to the final cost of goods or services after all taxes, discounts, etc., are applied. If there is a sales tax for some goods or services, the sale price will be higher than the listed price, sometimes referred to as the sticker price. Given a price and a sales tax rate, there are several ways to compute the sale price.
One method is to directly apply the sales tax by multiplying the sales tax rate (in fraction or decimal form) by the original price, then add the calculated amount to the original price.
Example
Joseph bought a large chocolate chip cookie that costs $2.00. The sales tax in his state is 8.5%. How much does Joseph have to pay in total?
Convert 8.5% to decimal form by dividing 8.5 by 100: 8.5% = 0.085. Then multiply this value by the cost of the cookie:
0.085 × 2.00 = 0.17
Thus, the sales tax comes out to $0.17, which we add to the original price to find the sale price:
2.00 + 0.17 = 2.17
The sale price of the chocolate chip cookie is $2.17 once sales tax is applied.
A more efficient method for calculating the sale price is to add 100% to the sales tax, then multiply the original price by the new percentage. Using the above example, rather than first multiplying $2.00 by 0.085, we would instead multiply 2 by 1.085, which is the equivalent of increasing 2 by 8.5%.
2 × 1.085 = 2.17
In both cases, the result is the same, and the cookie will cost $2.17 with sales tax.
In some cases, the initial price and the sale price may be known. Given that we know both of those things, it is possible to determine the sales tax rate as follows.
Example
If the cost of your groceries is $52.09 before sales tax and $56.39 after tax, what is the sales tax rate?
The sales tax rate can be found as the difference between the original price and the sale price, divided by the original price:
The sales tax rate is therefore 8.25%.