Adding tax
Multiply the net price by 1 plus the rate. With 20% VAT, 100 becomes 100 × 1.20 = 120. With 8.25% sales tax, 50 becomes 50 × 1.0825 = 54.13.
Removing tax
To find the price before tax, divide by 1 plus the rate. 120 including 20% VAT is 120 ÷ 1.20 = 100 net, so the VAT inside it is 20.
The mistake to avoid is taking 20% off the gross price: 120 − 20% = 96, which is wrong, because the 20% was added to 100, not to 120. The tax inside a gross price is gross × rate ÷ (1 + rate): at 20%, one sixth of the gross price.
VAT and sales tax
VAT and GST are charged at each step of the supply chain and are normally included in the shelf price. US sales tax is charged only on the final sale and is usually added at the till, with rates that differ by state, county and city.
Calculators
The VAT Calculator and the Sales Tax Calculator add or remove tax at any rate. To bill a client with tax shown, the Invoice Generator adds it to each invoice.
A worked example at 19%
A price of 59.50 includes 19% VAT. The net price is 59.50 ÷ 1.19 = 50.00, and the VAT is 59.50 − 50.00 = 9.50. Check it: 50.00 × 0.19 = 9.50.
Rounding: per line or per invoice?
Three items at 0.99 net with 19% VAT give 0.1881 of VAT each, rounded to 0.19, so 0.57 if each line is rounded. Calculated on the total, 2.97 × 0.19 = 0.5643, rounded to 0.56. Both methods are used, but an invoice should apply one consistently; the rules of your country may say which.
Discounts
A discount is taken off the net price, and tax is then calculated on what is left. A 10% discount on 100 net at 20% VAT gives 90 net, 18 VAT and 108 gross.