Business Math: How to Calculate Sales Tax

Calculating sales tax is probably easier than you think. All you have to do is multiply the amount of your item or total of items by the sales tax.

In order to do this, though, you need to do one simple step: Convert the percent into decimal form.

The Method

To convert a percent to a decimal, you just need to move the decimal over two places. If you don’t see a decimal point, that’s no problem. There is a decimal point after every whole number.

6 is the same as 6.

So if you want to find 6% sales tax for an item costing $12, simply move the decimal point to the left two places and multiply.

You will write 6% as .o6. Now multiply that by 12 to find the sales tax.

.06×12 = .72

So your sales tax on the $12 item is 72 cents.

What Converting a Percent to a Decimal Means

The percent symbol is used to tell you something about the number it sits beside. Percent means ‘parts per hundred’. So if a percent sign sits beside a 6, it really means 6 parts per 100. You don’t need to know this to calculate sales tax but it might help you to understand why you need to convert the percent to a decimal to begin with. 6% tells us that we need to multiply our item price by 6 pieces of a hundred (100 cents in a dollar).

Do you remember what the decimal places mean? The first decimal place is the tenths place and the second is the hundredths place. This is why when we convert our percent we have to move two place.

Example

A car costs $5,400 and the sales tax rate is 8.4%. How much is the total cost of the car after tax?

Step 1:

Convert the tax rate to a decimal by moving the decimal two places to the left and removing the percent symbol. Our multiplier then becomes .084.

Step 2:

Multiply .084 by 5,400 to get 453.60. $453.60 is the amount of tax you’ll be paying on the car.

Step 3:

Add your tax to the price of the car for the total price of the car. 453.60 + 5,400 = $5853.60

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