Solo Biz Soft Editorial Team Adding tax to a price is easy. Taking it back out is where people go wrong. This guide shows both, using a rate of 20% as the example. Always use the rate that applies to you.
The formula
Add tax: total = net price × (1 + rate). Remove tax: net price = total ÷ (1 + rate). The tax amount is the difference between the two.
Step by step
- Write the tax rate as a decimal (20% is 0.20).
- To add tax, multiply the price by 1.20.
- To remove tax, divide the total by 1.20.
- Subtract to find the tax amount.
Worked example
A net price of 100 plus 20% tax is 120. To go back from 120, divide by 1.2 to get 100, so the tax was 20. If you wrongly took 20% off 120 you would get 96.
Common mistakes
- Taking a percentage off the total instead of dividing
- Using the wrong rate for the goods or services
- Rounding each line instead of the invoice total, if your rules require it
Skip the maths: use our free VAT and sales tax calculator. Add tax to your invoices with the free invoice generator.
Frequently asked questions
What is the difference between VAT and sales tax?
VAT is charged at each stage of the supply chain and businesses reclaim the VAT they pay. Sales tax is usually charged once to the final customer.
Do I need to charge VAT?
It depends on your country, turnover and what you sell. Check with your tax authority.
How do I find the VAT in a VAT-inclusive price at 20%?
Divide by 6, since the VAT is one sixth of the total.
More free tools: browse all our free calculators.
This article is general information, not tax advice. Check the rules and rates that apply to you.