What State Is Your Customer In And Do You Have Nexus There
Five states have no sales tax: New Hampshire, Oregon, Montana, Alaska, and Delaware. So youâre not required to collect sales tax when making a sale to a buyer in that state.
That means every other state has a sales tax. The good news is that you are only required to collect sales tax in a state where you have âsales tax nexus.â Nexus just means that you are subject to a stateâs sales tax laws. Youâll always have sales tax nexus in the state where you operate your business. But other business activities may give you nexus, too. Employees, a physical store, a warehouse presence and other business activities create sales tax nexus. If you have nexus in a state, then that state generally requires you to collect sales tax from buyers in the state.
Sales tax laws are also changing fast. A recent Supreme Court ruling stated that you may have sales tax nexus in a state if you make a large amount of sales in that state. We recommend using an online sales tax nexus tool or speaking with a sales tax expert if you need help collecting sales tax.
Reverse Sales Tax Definition
Have you ever wondered how much you paid for an item before the sales tax or if the sales tax on your receipt was correct? Now you can find out with our Reverse Sales Tax Calculator.
Our Reverse Sales Tax Calculator accepts two inputs. All you have to input is the amount of sales tax you paid and the final price on your receipt.
Sales Tax Generally Depends On The Ship
When selling online, you first need to determine if you are required to collect sales tax from buyers in your buyerâs state. Next, you need to determine the sales tax rate at the buyerâs location.
There are over 10,000 sales tax jurisdictions in the United States. And the sales tax rate you charge depends on your buyerâs shipping address. For example, the sales tax rate in Atlanta, GA is 8.9%, but the sales tax rate just outside the city limit is 7%. To collect sales tax when selling online, you must determine if your customer lives within the Atlanta city limits or outside them.
If your customer lives in Atlanta proper, youâd charge them 8.9% sales tax. But if they live outside the city limits, youâd only charge 7%.
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Why A Reverse Sales Tax Calculator Is Useful
A Reverse Sales Tax Calculator is useful if you itemize your deductions and claim overpaid local and out-of-state sales taxes on your taxes. The only thing to remember about claiming sales tax and tax forms is to save every receipt for every purchase you intend to claim.
Most states and local governments collect sales tax on items that are sold in stores. For some individuals, knowing how much sales they paid is essential for filling out correct tax returns and receiving monetary credit for overpaid sales tax. This is especially beneficial if you have to list your out-of-state purchases to you current state of residence and the taxes paid on those purchases.
To use our Reverse Sales Tax Calculator, you can visit our website or put the calculator on your own website with our widget code. Our widget is even customizable so that you can match the background and text colors to the layout of your website.
How To Use The Reverse Sales Tax Calculator
Using this reverse tax calculator is extremely simple and easy. Use this online tool whenever you need to check the amount of the items youve purchased before the added sales tax. To use the sales tax calculator, follow these steps:
- There are two options for you to input when using this online calculator.
- For the first option, enter the Sales Tax percentage and the Net Price of the item which is a monetary value.
- For the second option, enter the Sales Tax percentage and the Gross Price of the item which is a monetary value.
- Upon entering the two values, the calculator will automatically generate the Tax Amount.
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What Taxes Does Quebec Apply
Calculating sales tax in Quebec is easy. Quebec applies 9.975% QST and 5% GST to most purchases, meaning a 14.975% total sales tax rate. QST stands for Quebec Sales Tax. It is Quebec’s name for the Provincial Sales Tax that is applied in several other provinces. GST stands for General Sales Tax.
As a majority French-speaking province, you may come across Quebec’s sales tax names and abbreviations in French while travelling their or doing business with a company based there. QST and GST may be referred to as taxe de cente du Québec and taxe sur les produits et services respectively.
| Type of taxes |
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Here is an example of how Quebec applies sales tax:
$100 + = $114.97 total
Taxes On Your Receipt
If you have a printed receipt from a store, its likely theyve already separated out the amount charged in sales tax for you. Some stores will print what the sales tax percentage is in that locale as well. If you see a receipt with Tax 1 and Tax 2, the store is probably differentiating tax rates that go to two different government bodies for example, city and state, or county and state. You can turn to a tax rate calculator for help.
As the team at Thomson Reuters explains, businesses are required to keep track of the taxes they collect, so whether or not taxes are shown together or separate usually depends on the method a business is using to sum up and track their taxes charged. Some systems use the register and receipt, while others might use a spreadsheet.
References
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History Of The Sales Tax
The very first taxes in human history were direct taxes, which are a type of tax imposed on individual persons. The most general ones were the corvée, compulsory labor provided to the state in Egypt , and the tithe, where crops and grains were given to the state from landowners, which was invented in ancient Mesopotamia. Sales tax, which belongs to another basic form of taxation, the indirect taxes, were also present in ancient time. Tomb paintings in Egypt, dating back around 2000 BC, portray tax collectors and sales taxes on commodities, such as cooking oil, can be traced to that time . In Europe, sales tax appeared firstly during the reign of Julius Caesar around 49 BC-44 BC, when the government of Rome enforced a payment of 1 percent sales tax. Sales tax gradually became widespread over Europe. Spain had a national sales tax from 1342 until the 18th century, with rates varying between 10 and 15 percent. Also, it was introduced in France where it didn’t enjoy much popularity: during the 17th century alone, there were 58 rebellions against it . However, in modern times the sales tax in Europe took a declining path, and from the 1960s the dominating consumer-based tax steadily became the value-added tax.
How Do I Figure Sales Tax
Audrey has a Juris Doctor from Stetson University College of Law and a Bachelor of Arts in English from Trinity University.
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Calculating sales tax requires simple mathematical calculations. The most difficult aspect of figuring the amount of sales tax to charge or that you will be charged is identifying the specific local, county or city rates to charge.
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More Sales Tax Calculations
If you have a final cost receipt and need to determine what portion of it is taxes: take the sales tax rate and add 1 to represent the total amount being charged. In this example, this gives 1.055.
Look at the receipt and determine the total final bill price for this example, lets say the total bill was $100. Divide the total bill by the total rate to determine the initial sales price: / = $94.79. Then subtract the sales price from the final bill price to determine the amount that was charged as taxes: in this case, $100 – $94.79 = $5.21 charged in taxes.
If you have the sale price and the final cost, and want to determine the tax rate, you can use a reverse sales tax calculator. Alternatively, you may subtract the sale price from the final cost to determine the amount paid in taxes. For this example, lets say the item cost $200 and the final amount charged was $213, meaning $13 was paid in sales tax. Then, divide the sales tax by the original cost to determine the tax percentage rate. In this case, / = 0.065. You can multiply this rate by 100 to determine that in that area, the sales tax is 6.5 percent.
Add Calculated Tax To Item Price
Finally, you add the amount of sales tax to the item to calculate the total sale cost, including tax: $105.00. This is what the customer must pay you or what you must pay the seller to purchase the item and fully pay your sales tax obligation.
If the example of the discounted item, the $85.00 item, was also subject to a five percent sales tax, the calculation would be:
- 85 x .05 = 4.25
- 85 + 4.25 = $89.25
Here, the customer would pay you or you would pay the seller $89.25 for the item.
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Calculating The Sales Tax Percentage Of A Total:
If we are given the total cost of an item or group of items and the pre-tax cost of the good, then we can calculate the sales tax percentage of the total cost. First, we need to subtract the pre-tax value from the total cost of the purchase. Next, we need to create a ratio of the sales tax to the pre-tax cost off the items. Last, we need to create a proportion where the pre-tax cost is related to 100% and solve for the percentage of the sales tax. Let’s start by working through an example. If a person pays $245.64 for groceries that cost $220.00 pre tax, then what is the sales tax percentage for the items.
First, subtract the pre-tax value from the total cost of the items to find the sales tax cost.
Next, create a ratio of the sales tax to the pre-tax cost of the items.
Last, create a proportion where the pre-tax value is proportional to 100% and solve for the percentage of sales tax.
Cross multiply and solve.
Isolate the sales tax percentage to the left side of the equation by dividing each side by the pre-tax value.
Round to two decimal places since our answer is in dollars and cents.
Last, we can check this answer by calculating the sales tax percentage of the total as seen previously.
First, we need to convert the sales tax percentage into a decimal by moving the point two spaces to the left.
Now, we need to multiply the pre-tax cost of this item by this value in order to calculate the sales tax cost.
Round to two decimal places since our total is in dollars and cents.
How To Find Sales Tax From Final Price
So determining what the sales tax is going to be is easy enough once you know your regions sales tax, but how do you go about finding what your regional sales tax rate is just by looking at your receipt? Theres a way to calculate that as well! If a receipt doesnt already display your areas sales tax, you can look at the dollar amount that the sales tax added to the price of the item and determine what the sales tax percentage is.
You do this by taking the final, post-tax sales price of an item, subtracting the pre-tax price of the item from it, and dividing the whole thing by the pre-tax price of the item. So, say your final sale cost $107, and the item you bought was $100. Thats 107 100, which is 7, divided by 100, which is 0.07. So thats a 7% sales tax.
Example
Now for the tougher example. Lets say you paid $3,780 total for an item that cost $3,500. First, you would take the total price and subtract the pre-tax item price from it.
/ 3,500 =
Then you would divide the whole thing by the pre-tax item price.
280 / 3,500 =
And youll find that your sales tax is
0.08 =
So if you paid $3,780 for an item that was $3,500, then you bought that item in a region with an 8% sales tax rate. Congrats! Now you know how to find sales tax both ways.
Want to get great at solving sales tax problems in your head, without having to whip out your cellphone calculator in the middle of the store? Check out this course on mental math for some tips!
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Sales Tax Rates Are A Combination Of Multiple Taxes
The reason the sales tax rates in and around cities like Atlanta vary is because the total sales tax rate is made up of smaller rates. Each state sets a statewide sales tax rate. Then counties, cities, special taxing districts, and other local areas are allowed to add on more sales tax.
Letâs look at the sales tax rate in the city of Atlanta as an example. The Georgia state sales tax rate is 4%. Atlanta is in Fulton County, which sets a sales tax rate at 3%. And then the city of Atlanta sets an additional sales tax rate of 1.9%. Add those three different taxes up, and you get the Atlanta total sales tax rate of 8.9%.
| Taxing Jurisdiction |
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Identifying The Sale Price
An item’s sale price is what a customer is charged for its purchase. This means that it includes any discounts or other reductions. For example, an item costing $100.00 having no applicable reductions has a sale price of $100.00, but an item costing $100.00 on sale for fifty percent off is $50.00. You calculate this by multiplying the converted reduction percentage and then subtract the result from the price total. For example:
- 100 x .5 = 50
- 100 – 50 = 50
The result is the item’s sale price: $50.00. Another example: a $100.00 item is on sale for 15 percent off:
- Convert the percentage reduction: 15 = .15
- Multiply the price by the converted value: 100 x .15 = 15
- Subtract the result from the total price: 100 – 15 = 85
- The result is the item’s sale price including the discount: $85.00
This calculation is essential because it is the sale price including the discount that you use to calculate sales taxes.
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Tax Included & How To Back Out Sales Tax
This article provides a workaround for including tax in the prices of inventory items. To get started, update sales prices for your items to add the relevant tax amount, and organize items into departments that represent each tax rate. Because Lightspeed Retail does not officially support tax-inclusive pricing or VAT, you will need to manually calculate the estimated amount of tax collected at the register.
IMPORTANT: Before continuing, be aware that by using this workaround:
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How To Find The Original Price After Tax
You may want to calculate the original price of an item after sales tax so you know what the price will be when the sale is over, because you may not be able to make the purchase during the sale. In this instance, you have the sales price with tax and you want to find the original price with sales tax. You find the original price as above and add the sales tax to it.
Building on the previous example:
If the original price of the sale item is $57.14 and the tax rate is 8 percent, you would use this formula:
How To Find The Original Price
Do you always strive to get the best deals on items you purchase? Knowing the original price of an item on sale can help you determine if that discount is worth considering. Some retailers mark prices upward and then take a discount off, so it looks like a great sale price, and learning how to do sales and sales tax calculations lets you find out just how good a deal you are getting.
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How To Deduct Sales Tax In The Us
When filing federal income tax, taxpayers need to choose to either take the standard deduction or itemize deductions. This decision will be different for everyone, but most Americans choose the standard deduction. Sales tax can be deducted from federal income tax only if deductions are itemized. In general, taxpayers with sales tax as their only deductible expense may find that itemizing deductions is not worth the time. Itemizing deductions also involves meticulous record-keeping and can be tedious work because the IRS requires the submission of sales tax records, such as a year’s worth of purchase receipts. Anyone who plans to itemize should be keeping detailed records, as it will be very helpful in determining the amount of sales tax paid.
For more information about or to do calculations involving income tax, please visit the Income Tax Calculator.
