Reverse Tax Formula Explained With Examples
The formula to work backwards from a tax-included price is straightforward. This post breaks it down with examples and edge cases.
The Formula
Original Price = Total ÷ (1 + Tax Rate ÷ 100)This is the only formula you need to reverse any sales tax calculation.
Breaking It Down
When a price had tax added to it, the merchant used: Total = Original × (1 + rate). To reverse it, you divide both sides by (1 + rate):
Total ÷ (1 + rate) = OriginalWorked Examples at Different Rates
| Total | Rate | Formula | Original |
|---|---|---|---|
| $106.00 | 6% | $106.00 ÷ 1.0600 | $100.00 |
| $107.50 | 7.5% | $107.50 ÷ 1.0750 | $100.00 |
| $108.00 | 8% | $108.00 ÷ 1.0800 | $100.00 |
| $110.25 | 10.25% | $110.25 ÷ 1.1025 | $100.00 |
Edge Cases
Zero tax: If tax rate is 0%, the formula gives you the total as the original—correct.
Multiple tax components: Add state + local rates together first, then use the combined rate in the formula.
Partial tax exemptions: If only some items are taxable, you can't use this formula on the combined total. You need the taxable and non-taxable subtotals separately.
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