Updated on May 28, 2022
Table of Contents
Sales Tax Calculation
Divide the total amount received by “1 + the sales tax rate” in order to compute the sales tax included in the company’s receipts. Sales tax is calculated by multiplying taxable receipts by the sales tax rate. Divide the taxable sales by 1.0725 if the sales tax is 7.25 percent.
Example of the Sales Tax Calculation
Consider a 7 percent sales tax on everything sold in a vending machine as an illustration. Vending machine receipts totaled $481.50 in the most recent month. As a result, the $481.50 total includes both the goods sales proceeds and the corresponding sales tax. For example, using mathematics, we can figure out exactly what things were sold and how much tax they were subject to: $481.50.
Suppose that S is the actual sales of goods (before deducting the sales tax) and that 0.07S is the actual sales tax. Assuming that the final total includes the sales tax, we can write S + 0.07S = 1.07S = $481.50 as the final total. Subtracting $481.50 from 1.07 yields S. As a result, the real goods sales came to $450 in total. In this case, the 7 percent sales tax equates to $31.50 ($450 multiplied by 0.7 percent). Let’s check to see whether everything adds up: There were total sales of $481.50 from the vending machines, which was the result of $450 product sales plus $31.50 in sales tax.
Additional Example of the Sales Tax Calculation
In this example, let’s imagine that a corporation has $32,100 in sales revenues, which includes a 7% sales tax. You’ll have to pay 0.07S in sales tax to cover the actual sales. As a result, the total cost of S + 0.07S is $32,100. In reality, sales will be $30,000 ($32,100 divided by 1.07 = $30,000). The true sales tax will be 0.07 X $30,000 = $2,100. It’s easy to see that our proof is $32,100: $30,00 in sales plus $2,100 in sales tax. It can be summarised as follows: debit Cash $32,100; credit Sales $30,000, and debit the Sales Tax Payable $2,100.
