How Sales Tax Works

Add mode: tax = price × rate, total = price + tax. Reverse mode extracts the pre-tax price from a tax-inclusive total: before-tax = total ÷ (1 + rate), tax = total − before-tax.

Worked Example

A $100 item at 8.25% carries $8.25 of tax for a $108.25 total. Working backward, a $108.25 total at 8.25% reveals a $100 pre-tax price. Combined US state-and-local rates average about 7.12%, from 0% in tax-free states to over 10% in some cities.

Who Collects It

Sales tax is collected by the retailer at the point of sale and remitted to the state and local governments. Online sellers now collect it in most states following the 2018 Wayfair ruling, which allowed states to require out-of-state sellers to charge tax on remote sales — closing a long-standing e-commerce loophole.