Taking sales tax back out of a total, and other things that go wrong
A Texas receipt shows $108.20 including 8.20% sales tax. What was the pre-tax price? Subtract 8.20% and you get $99.33. The answer is $100.00. Adding a rate and removing it are not the same operation.
Two directions, two formulas
Going forward is easy. Tax equals the pre-tax price times the rate, and the total is the pre-tax price times one plus the rate. At 8.20%, $100.00 becomes $8.20 of tax and a $108.20 total.
Going backward is where money is lost. The pre-tax price is the total divided by one plus the rate, and the tax is the total times the rate divided by one plus the rate. So $108.20 ÷ 1.082 = $100.00 exactly, and the tax is $108.20 × 0.082 ÷ 1.082 = $8.20.
Subtracting the rate from the total instead removes 8.20% of $108.20, which is $8.87. That is $0.67 too much, because the tax was never a percentage of the total; it was a percentage of the smaller pre-tax figure.
The gap is always the same fraction of the total: the rate squared, divided by one plus the rate. At 8.20% that is 0.62%. On a $50,000 equipment invoice it is about $311, which is no longer a rounding argument.
The rate in the dropdown is an average, not your rate
The state figures in this calculator come from the Tax Foundation's State and Local Sales Tax Rates, Midyear 2026, published July 6, 2026 by Abir Mandal. They are population-weighted averages of state and local rates, built to compare states with each other. They are not the rate in force at any particular address.
California is the clearest case. The statewide base is 7.25%, district taxes add roughly 0.10% to 2.00% or more, and real combined rates run from 7.25% to about 10.75%. The 9.03% average is charged essentially nowhere. Texas is 6.25% state plus up to 2% local with a statutory maximum of 8.25%, against an 8.20% average. Colorado's state rate is only 2.90%, yet some combined rates exceed 11%, so the 7.89% average is a fiction at the register.
The national population-weighted average combined rate is 7.53%, and no statewide rate changed between January and July 2026. That is a useful number for an article and a bad number for an invoice.
For anything you actually bill, use the state's own address-level lookup: the CDTFA rate lookup in California, the Washington Department of Revenue tax rate lookup, the Texas Comptroller's rate tools. The rate follows the delivery address, not the state name.
Four states with no sales tax, and one that only looks like it has one
Delaware, Montana, New Hampshire and Oregon levy no state and no local sales tax. Their entry is 0.00% and that is literally true at the register.
Two footnotes. Delaware has no sales tax but does impose a gross receipts tax on the seller, so the cost shows up in prices rather than on the receipt. Oregon has no general sales or use tax but does levy a vehicle use tax on new vehicles bought out of state.
Alaska is the trap. Alaska has no state sales tax at all. The 1.82% figure is a population-weighted average of borough and municipal rates, and it is the rate at almost no Alaskan address: Anchorage, roughly 40% of the state's population, charges 0%, while Juneau charges 5%. If you select Alaska and accept 1.82%, you have produced a number that is wrong for every Alaskan. Look up the local rate for the specific borough or city, or enter it as a custom rate.
Gross receipts taxes wearing a sales tax costume
Hawaii's 4.50% is not a sales tax. It is the General Excise Tax, legally a tax on the business's gross income, at 4% plus a 0.5% Honolulu county surcharge that runs from January 1, 2007 through December 31, 2030.
That legal difference changes the arithmetic. Because whatever the business passes on to the customer is itself part of its gross income, the maximum a business may visibly pass on is 4.712% on Oahu (4.5 ÷ 95.5) and 4.166% where there is no county surcharge (4 ÷ 96). Charging a customer more than the maximum pass-on rate violates Hawaii consumer protection law. New Mexico is similar in kind: its 4.88% state and 7.68% combined figures are a gross receipts tax, not a sales tax.
New Jersey shows the averaging problem in its purest form. The statutory rate is 6.625% statewide with no local sales tax at all, yet the table shows 6.60%, because the average local rate is negative at −0.02%. That negative comes from Urban Enterprise Zones, where qualifying in-zone retail sales are taxed at half rate, 3.3125%. At virtually every New Jersey address the correct rate is 6.625%, and at a few it is 3.3125%. It is never 6.60%.
Sales tax is not VAT
US sales tax is collected once, at the retail sale, from the final consumer. VAT systems such as Korea's 부가가치세 and Japan's 消費税 are collected at every stage of the chain, with each business deducting the tax it paid on its inputs, so only the value it added is taxed.
That makes headline rates non-comparable. Korea's rate is a flat 10% on nearly everything under Article 30 of the Value-Added Tax Act, with zero-rating for exports and exemptions for basics like medical care and education. Japan runs 10% standard and 8% reduced for takeaway food and qualifying newspaper subscriptions. Putting California's 9.03% next to Korea's 10% is not a like-for-like comparison, because the base and the collection mechanism differ.
The display convention differs too. Japan requires consumer prices to be shown tax-inclusive, and Korean consumer prices normally are, which is why the reverse calculation matters so much there. US shelf prices are almost always pre-tax, and the tax appears only at checkout. If you are an accountant reconciling a US subsidiary against a Korean or Japanese parent, that difference is the first place the numbers stop matching.
Rounding, and the schedule that can override your arithmetic
There is no federal rounding rule. States require the tax to be stated in cents, and round-half-up is the near-universal convention.
Some states go further and publish bracket or collection schedules whose result can differ by a cent from rate times price. New Jersey's ST-475U sales tax collection schedule and New York's Publication 718 are the usual examples. Where a state publishes such a schedule, it controls, and matching it beats matching your spreadsheet.
In practice, round the tax to cents first and then derive the total from the rounded tax, so the pre-tax figure, the tax and the total always reconcile. Deriving each of the three independently is how invoices end up one cent out.
Everything here is an estimate built from published averages. Before you file a return or send an invoice, confirm the rate for the specific delivery address with the state revenue department and check your treatment with your tax adviser.
Combined state and average local sales tax rates, Tax Foundation, Midyear 2026 (published July 6, 2026)| State | Combined rate |
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| Louisiana | 10.13% — highest combined average in the country |
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| Tennessee | 9.61% (7% state rate) |
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| Washington | 9.57% (6.5% state rate) |
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| Arkansas | 9.48% |
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| Alabama | 9.46% |
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| National average | 7.53% population-weighted combined rate |
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| Delaware, Montana, New Hampshire, Oregon | 0.00% — no state and no local sales tax |
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| Alaska | 1.82% is an average of local rates only; no state sales tax, Anchorage 0%, Juneau 5% |
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Frequently asked questions
- How do I back sales tax out of a total?
- Divide the total by one plus the rate. A $108.20 total at 8.20% gives $108.20 ÷ 1.082 = $100.00 pre-tax and $8.20 of tax. Subtracting 8.20% from the total gives $99.33, which is $0.67 wrong, and the error grows with the invoice.
- Which state has the highest sales tax?
- By combined state and average local rate, Louisiana at 10.13%, then Tennessee 9.61%, Washington 9.57%, Arkansas 9.48% and Alabama 9.46%. These are population-weighted averages; the rate at a specific address can be higher or lower.
- Which states have no sales tax?
- Delaware, Montana, New Hampshire and Oregon have no state or local sales tax. Alaska has no state sales tax but many boroughs and cities levy their own, from 0% in Anchorage to 5% in Juneau. Delaware charges sellers a gross receipts tax instead.
- Is Hawaii's 4.5% a sales tax?
- No. It is the General Excise Tax, a tax on the business's gross income, 4% plus a 0.5% Oahu surcharge. Because the amount passed on is itself gross income, the maximum a business may visibly pass on is 4.712% on Oahu and 4.166% elsewhere in the state.
- Is US sales tax the same as VAT?
- No. Sales tax is charged once at retail to the final consumer. VAT is charged at every stage, with businesses deducting the tax on their purchases. That is why a 9.03% US average and Korea's 10% VAT are not comparable figures, even before you account for what each system actually taxes.
