Calculating Sales And Use Tax

Calculate your total cost including Sales and Use Tax with our easy-to-use calculator. Enter the purchase amount and the applicable tax rate to find the total tax and final price.

Breakdown of Costs including Sales and Use Tax

Item	Amount ($)
Purchase Amount	100.00
Sales and Use Tax	7.00
Total Amount	107.00

What is Sales and Use Tax?

Sales and Use Tax is a consumption tax imposed by governments on the sale of goods and services. A sales tax is collected by the seller from the consumer at the point of sale. Use tax, on the other hand, is a tax on the storage, use, or consumption of a taxable item or service on which no sales tax has been paid, or sales tax was paid at a lower rate than the rate in the consumer’s location. Typically, if you buy an item from an out-of-state seller who doesn’t collect sales tax for your state, you are responsible for remitting use tax directly to your state.

Most individuals and businesses encounter sales tax regularly when making purchases. Use tax is more common for businesses that purchase goods out-of-state for use within their state or for individuals who buy items from remote sellers not required to collect sales tax for their jurisdiction. Understanding your Sales and Use Tax obligations is crucial for compliance. Our state tax calculator can help with state-specific rates.

Who should use it?

Anyone making taxable purchases or using taxable items where sales tax wasn’t collected should be aware of Sales and Use Tax. This includes consumers buying goods online or out-of-state, and businesses purchasing equipment, supplies, or services.

Common misconceptions

A common misconception is that if you buy something online and aren’t charged sales tax, you don’t owe any tax. This is incorrect; you likely owe use tax to your state. Another is that only businesses pay use tax, but individuals are also liable. Also, many believe Sales and Use Tax rates are the same everywhere, but they vary significantly by state, county, and even city.

Sales and Use Tax Formula and Mathematical Explanation

The calculation for Sales and Use Tax is generally straightforward:

1. Determine the taxable amount (the price of the item or service before tax).
2. Identify the applicable combined sales or use tax rate (as a percentage) for the location where the item is purchased or will be used.
3. Convert the tax rate from a percentage to a decimal by dividing by 100.
4. Multiply the taxable amount by the decimal tax rate to find the tax amount.
5. Add the tax amount to the original taxable amount to get the total cost.

The formula is:

Tax Amount = Purchase Amount × (Tax Rate / 100)

Total Amount = Purchase Amount + Tax Amount

Or combined:

Total Amount = Purchase Amount × (1 + (Tax Rate / 100))

Variables Table:

Variable	Meaning	Unit	Typical Range
Purchase Amount	The pre-tax price of the goods or services.	Currency (e.g., $)	$0.01 and up
Tax Rate	The combined sales or use tax rate applicable.	Percentage (%)	0% – 15% (varies by location)
Tax Amount	The amount of Sales and Use Tax due.	Currency (e.g., $)	$0.00 and up
Total Amount	The final price including the Sales and Use Tax.	Currency (e.g., $)	$0.01 and up

Practical Examples (Real-World Use Cases)

Example 1: In-State Retail Purchase

Sarah buys a laptop for $1,200 in a state with a 6% sales tax rate and a local tax of 1.5%.

• Purchase Amount: $1,200
• Combined Tax Rate: 6% + 1.5% = 7.5%
• Tax Amount = $1,200 × (7.5 / 100) = $1,200 × 0.075 = $90
• Total Amount = $1,200 + $90 = $1,290

Sarah pays $1,290 at the register, including $90 in Sales and Use Tax.

Example 2: Online Purchase from Out-of-State Seller (Use Tax)

John lives in a state with a 5% use tax rate. He buys furniture online for $800 from a seller in another state who doesn’t collect sales tax for John’s state.

• Purchase Amount: $800
• Tax Rate (Use Tax): 5%
• Tax Amount (Use Tax Owed) = $800 × (5 / 100) = $800 × 0.05 = $40
• Total Cost to John (including tax he must remit) = $800 + $40 = $840

John is responsible for reporting and paying the $40 use tax to his state, often with his state income tax return. Understanding this is key to managing your use tax guide obligations.

How to Use This Sales and Use Tax Calculator

1. Enter the Purchase Amount: Input the price of the item or service before any taxes are applied into the “Purchase Amount ($)” field.
2. Enter the Tax Rate: Input the combined state and local Sales and Use Tax rate applicable to your purchase or location in the “Tax Rate (%)” field. If you are calculating use tax, use your local use tax rate.
3. Calculate: Click the “Calculate Tax” button or simply change the input values. The results will update automatically.
4. View Results: The calculator will display:
   • Total Tax Amount (primary result)
   • Taxable Amount (which is your Purchase Amount)
   • Tax Rate Used
   • Total Amount (Purchase Amount + Tax)
5. Reset: Click “Reset” to clear the fields and start over with default values.
6. Copy Results: Click “Copy Results” to copy the main outcomes to your clipboard.
7. Analyze Table and Chart: The table and chart below the calculator visually break down the purchase amount, tax, and total amount.

Use the results to understand the full cost of your purchase or the amount of use tax you may need to remit. Knowing the Sales and Use Tax impact helps in budgeting and compliance.

Key Factors That Affect Sales and Use Tax Results

1. Location of Sale/Use: Sales and Use Tax rates vary significantly between states, counties, and even cities. The rate is determined by the location of the transaction or where the item is used. Check local tax rates for specifics.
2. Type of Item or Service: Some goods and services are taxed at different rates or are exempt from Sales and Use Tax altogether. Necessities like groceries or prescription drugs are often exempt or taxed at a lower rate, while luxury items might have higher rates in some places. See our info on sales tax exemption.
3. Seller’s Nexus: For online or remote purchases, whether the seller has a “nexus” (sufficient physical or economic presence) in your state determines if they collect sales tax. If not, you owe use tax. The rules around online sales tax are complex.
4. Tax Holidays: Some states have “sales tax holidays” on specific dates, usually for items like school supplies or clothing, during which Sales and Use Tax is not charged up to a certain price.
5. Buyer’s Status: Certain buyers, like government agencies or non-profit organizations, may be exempt from paying Sales and Use Tax on their purchases if they provide proper documentation.
6. Manufacturing/Resale Exemptions: Businesses may be exempt from paying Sales and Use Tax on items purchased for resale or as components in manufacturing. Our business tax calculator might be useful here.
7. Shipping and Handling Charges: Whether shipping and handling charges are subject to Sales and Use Tax varies by state. Some states tax them, others don’t, and some only tax them if they are not separately stated.
8. Legislation Changes: Sales and Use Tax laws and rates can change, so it’s important to use up-to-date information.

Frequently Asked Questions (FAQ)

1. What is the difference between sales tax and use tax?

Sales tax is collected by the seller at the point of sale. Use tax is paid directly by the consumer to the state when sales tax was not collected (or collected at a lower rate) by the seller, typically on out-of-state or online purchases.

2. Why do I have to pay use tax?

Use tax ensures that purchases made from out-of-state sellers are taxed at the same rate as purchases made locally, leveling the playing field for local businesses and ensuring states receive tax revenue on these purchases. It’s a form of Sales and Use Tax.

3. How do I pay use tax?

Most states allow individuals to report and pay use tax on their annual state income tax returns. Businesses usually report and remit use tax more frequently.

4. Are all goods and services taxable?

No. Many states exempt necessities like groceries, prescription drugs, and some services. However, what is exempt varies greatly by state. Check your state’s department of revenue website for specifics on Sales and Use Tax exemptions.

5. Do I pay sales tax on online purchases?

It depends on whether the online seller has nexus in your state and is required to collect sales tax. If they don’t collect it, you are responsible for paying use tax.

6. What happens if I don’t pay use tax?

States are increasingly auditing individuals and businesses for unpaid use tax. Failure to pay can result in back taxes, penalties, and interest.

7. How is the tax rate determined?

The Sales and Use Tax rate is usually a combination of state, county, and city rates, based on the location where the purchase is made or the item is used.

8. Is shipping and handling subject to Sales and Use Tax?

This varies by state. Some states tax shipping and handling, while others do not, especially if these charges are stated separately from the price of the item.