Question 1

What is the difference between sales tax and VAT?

Accepted Answer

The clearest difference is the price tag. US sales tax is charged once, at the final retail sale, and the tag usually shows the pre-tax price — the 8.25% is added at the register, so a $100 item rings up at $108.25. VAT is collected at every stage on the value added, and European prices are normally tax-inclusive, so €120 on the shelf means you pay €120. Mathematically, sales tax adds onto a net price, while VAT is more often backed out of a gross price — which is exactly why this tool has a separate 'Extract from total' mode.

Question 2

Which US states have no sales tax?

Accepted Answer

Five states levy no statewide sales tax: Delaware, Oregon, Montana, New Hampshire, and Alaska. The first four have essentially no local sales tax either, so the price on the tag is what you pay. Alaska is the asterisk: it has no statewide rate, but it lets individual boroughs and cities charge their own local sales tax, which can reach roughly 7% in some places. So a purchase in Alaska is not automatically tax-free — it depends on the specific city.

Question 3

How do I work out the pre-tax price from a tax-inclusive total?

Accepted Answer

Use net = total ÷ (1 + rate). If a receipt shows $108.25 at an 8.25% rate, that is 108.25 ÷ 1.0825 = $100.00 pre-tax, with $8.25 of tax. The common mistake is multiplying the total by (1 − rate): 108.25 × (1 − 0.0825) = $99.32, which is 68 cents too low. The reason is that the tax was applied to the $100 net price, not to the $108.25 gross, so reversing it means dividing back out. The Extract mode does this for you.

Question 4

I sell into multiple US states online — which rate applies?

Accepted Answer

It depends on where you have 'nexus'. Since the 2018 South Dakota v. Wayfair decision, once your sales or order count in a state crosses a threshold (often $100,000 a year or 200 transactions), you must collect tax at the buyer's address rate — destination-based sourcing. So the same product shipped to California versus Oregon carries completely different tax. In practice you enter the state rate and the local rate separately and calculate per buyer address, which is what the two split fields in this tool are for.

Question 5

Is a restaurant tip part of the sales tax base?

Accepted Answer

Usually not. A voluntary tip is excluded from the sales tax base in most states because it is not part of the seller's charge for the meal. Two cases need care, though: a 'mandatory service charge' printed on the bill (common for large parties or banquets) is treated as taxable sales by many states; and some states tax prepared restaurant food at a different rate than retail goods. When figuring it out, add tax to the food charge first, then calculate the tip separately on the pre-tax or post-tax subtotal as you prefer.

Sales Tax Calculator — Add or Remove US Sales Tax

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Sales Tax Calculator — Add or Remove US Sales Tax

What this tool does

Tool details

How to use

1. Input

2. Process

3. Copy / Download

How Sales Tax Calculator fits into your work

Calculation jobs

Calculation checks

Good next steps

FAQ

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