How this number is made
VAT and GST are a percent added on the way to the customer, then handed to the tax authority. The painful case is a price that already includes the tax: dividing by 1 plus the rate gets the net back. Subtracting the percent from the gross price takes out too much.
- Use Add when you have a net invoice and the tax still has to be charged.
- Use Remove when the sticker, menu, or receipt total already includes the tax.
- Type the rate that applies to this item. A country often has more than one.
Formula
Add: tax = net × rate, gross = net + tax. Remove: net = gross ÷ (1 + rate), tax = gross − net.
Worked example
€100 plus 20% VAT is €20 of tax and €120 to pay. A €120 shelf price at 20% is €100 net and €20 of tax. Taking 20% off €120 leaves €96, which is the wrong net.
Questions
Which rate should I use?
The rate for that good in that country. Standard rates often sit near 5%, 10%, 15%, 18%, 20%, 21%, or 27%. Food, books, and exports are frequently lower or zero. The finance ministry’s table wins over a guess.
Is this the same as US sales tax?
The arithmetic is the same when sales tax is added at the register. US sales tax is usually not included in the shelf price. The sales-tax page on this site is aimed at that case and at state presets.