Tax included in sale price?

Claudia Whitten · Post by **Claudia Whitten** » Thu Aug 28, 2003 10:04 am

Hello all,
I have tried to remember the thread that had the formula for how to include sales tax in your sale price. If someone knows this formula please help.
Thanks.....Claudia

Phil Hoppes · Post by **Phil Hoppes** » Thu Aug 28, 2003 10:21 am

I don't know what was posted before but this is a simple calculation.

Given the following variable assignments:

GP = Gross Sales Price (This is the amount your customer pays)
NP = Net Sales Price (This is the net amount of proceeds you will receive for your goods.
TR = Tax Rate (This is the sales tax rate for the area you sell your item)

Now

GP = SP + TR*SP or

GP = SP*(1+TR)

With the above formula it is easy to figure a number of things for example if you want the GP to be an even dollar figure, lets say $50.00 and your sales tax rate was 6.1% then to figure your net sales price, or the amount you will net out of a $50.00 sale the formula is then:

SP = GP/(1+TR)

or for my example

SP = 50/(1+0.061) = 47.125

Note in this example, there is a fractional cent so in your accounting you will need to either round up or down so your final math is correct. The amount of sales tax collected in this example is simply the tax rate TR multiplied by the NET sales price SP.

Sales Tax = SP * TR = 47.125 * 0.061 = $2.875

As I explained you have fractional cents in this calculation so for accounting purposes your Sales Price should be $47.13 and then your Sales Tax would then be $2.87 so:

SP + Sales Tax = $50.00
$47.13 + $2.87 = $50.00

Phil

Claudia Whitten · Post by **Claudia Whitten** » Thu Aug 28, 2003 11:19 am

Phil Hoppes wrote:I don't know what was posted before but this is a simple calculation.

Given the following variable assignments:

GP = Gross Sales Price (This is the amount your customer pays)
NP = Net Sales Price (This is the net amount of proceeds you will receive for your goods.
TR = Tax Rate (This is the sales tax rate for the area you sell your item)

Now

GP = SP + TR*SP or

GP = SP*(1+TR)

With the above formula it is easy to figure a number of things for example if you want the GP to be an even dollar figure, lets say $50.00 and your sales tax rate was 6.1% then to figure your net sales price, or the amount you will net out of a $50.00 sale the formula is then:

SP = GP/(1+TR)

or for my example

SP = 50/(1+0.061) = 47.125

Note in this example, there is a fractional cent so in your accounting you will need to either round up or down so your final math is correct. The amount of sales tax collected in this example is simply the tax rate TR multiplied by the NET sales price SP.

Sales Tax = SP * TR = 47.125 * 0.061 = $2.875

As I explained you have fractional cents in this calculation so for accounting purposes your Sales Price should be $47.13 and then your Sales Tax would then be $2.87 so:

SP + Sales Tax = $50.00
$47.13 + $2.87 = $50.00

Phil

Phil,
Thank you, I think I get it. Did you change NP to SP in the formula?
I will play with this some and let you know if I have problems, not a math wiz here........Claudia

Marty · Post by **Marty** » Thu Aug 28, 2003 7:17 pm

I don't understand why you'd want to get involved in that- I keep the tax separate; I'm just collecting a state-mandated tax (and not getting paid to do it either!). If customers complain, I tell them to vote next time (no I really don't tell them that, I say I'm just collecting it). And on a high ticket item I will sometimes, to clinch a sale, offer a discount of 10% but I will still collect (and remit) the tax.

Claudia Whitten · Post by **Claudia Whitten** » Thu Aug 28, 2003 7:30 pm

Marty wrote:I don't understand why you'd want to get involved in that- I keep the tax separate; I'm just collecting a state-mandated tax (and not getting paid to do it either!). If customers complain, I tell them to vote next time (no I really don't tell them that, I say I'm just collecting it). And on a high ticket item I will sometimes, to clinch a sale, offer a discount of 10% but I will still collect (and remit) the tax.

Marty,
I have been adding the tax on and I haven't had anyone complain. I was just thinking that it would be easier than making change or having to have so much change. Most of the shows say that the artist is responsible for the sales tax. I wouldn't want anyone to think I was cheating and not charging tax. I think they would be afraid of having you in their show the next year. Some artist charge the sales tax but don't always write a sales slip for cash sales. I have been writing them even though they take time. Sometimes the customer keeps
looking and will buy more...Claudia

Phil Hoppes · Post by **Phil Hoppes** » Thu Aug 28, 2003 7:39 pm

Claudia,

Yes, I'm sorry I did flip NP to SP. I'm more than a bit dyslexic and tend to do things like that. Sorry for the confusion.

Phil

Sara · Post by **Sara** » Tue Sep 09, 2003 11:05 pm

I've found that I really can't stand keeping all that change around and therefore if someone pays cash I pay the tax . . . heavens knows I should have enough cushion in my coffers. If the total is large 'nuf I would charge although round down . . . (yet another reason to do primarily wholesale, no tax!) and if they pay by check or credit card I add the cash on, works fine for me and I don't need to carry around change. No one seems to mind or even to notice and I'm not paying much outta pocket.

S.

davebross · Post by **davebross** » Wed Sep 10, 2003 7:35 pm

Try this for including the tax in the price:

If you had a 6% tax, divide the total by 1.06 and that will give you the cost of the thing sold before the tax. If the tax was 7% it would be 1.07, 8% would be 1.08 etc. etc.

Let's say you sold something for $50 and had to pay 6% tax to the state.

50 divided by 1.06 = 47.169, which I would round up to 47.17, woiuld be the actual cost of the item.

subtract 47.17 from 50, which is 2.83, and you have your tax.