SalevaWhat this calculator does
Sales tax, GST and VAT all work the same way at the counter: a percentage is added to the price of the goods, and that part of the money is not yours. This calculator does the two sums a shop needs. A price before tax adds the tax and gives the amount the customer pays. A price that includes tax works backwards from the shelf price to show how much of it is tax and how much is your own sale.
How to use it
- Choose whether the price you are typing is before tax or already includes it.
- Enter the price and the tax rate that applies to that product.
- Add a quantity if you are working out a whole line of a bill. The result updates as you type.
Worked examples
Adding tax to a price
An item is priced at Rs 1,000 before tax and the rate is 18%. The tax is 1,000 × 18 ÷ 100 = Rs 180, so the customer pays Rs 1,180.
Taking tax out of a shelf price
The shelf price is Rs 1,180 and it already includes 18% tax. The price before tax is 1,180 ÷ 1.18 = Rs 1,000, and the tax inside the price is Rs 180.
price before tax = price including tax ÷ (1 + rate ÷ 100)
The mistake almost everyone makes
To find the tax inside a tax-inclusive price, it is tempting to take the rate straight off the total: 18% of 1,180 is 212.40. That is wrong. The tax was charged on the smaller, before-tax amount, so you must divide, not subtract a percentage. The difference here is Rs 32.40 on one item. Across a month of sales it becomes a real sum, and it always goes against you, because you set aside more tax than you collected or record less sales than you made.
| Rate | Price including tax | Tax inside it | Price before tax |
|---|---|---|---|
| 5% | 1,050 | 50 | 1,000 |
| 10% | 1,100 | 100 | 1,000 |
| 17% | 1,170 | 170 | 1,000 |
| 18% | 1,180 | 180 | 1,000 |
Tax is not part of your profit
When you work out a margin, use the price before tax. If you buy an item for Rs 800 and sell it for Rs 1,180 including 18% tax, your sale is Rs 1,000 and your profit is Rs 200, not Rs 380. A shop that prices from the tax-inclusive figure believes it is earning nearly twice what it really is. The profit margin calculator gives the right answer when you feed it the before-tax price.
Tips for small shops
- Decide once whether shelf prices include tax and keep to it. Customers expect the price on the tag to be the price they pay.
- Show tax as its own line on the bill where you are required to, or where business customers ask for it.
- Keep the tax you collect apart from daily spending. It is easy to treat it as cash in hand until the day it is due.
- Check which of your goods carry a different rate. Many places tax food, medicine or school supplies at a lower rate or not at all.
Questions
Is GST the same as sales tax or VAT?
For the sum at the counter, yes: each is a percentage added to the price. The names, the rates and the rules about who must register and file differ from country to country.
What rate should I use?
The rate that your tax authority sets for the product you are selling. The calculator starts at 18% only as an example. If you are not sure, ask your accountant or check your tax authority's published rates.
Does a small shop have to charge tax at all?
That depends on the rules where you trade and often on your turnover. This calculator does the arithmetic. It cannot tell you whether you must register. Your accountant or the tax office can.
How do I put tax on an invoice?
The invoice generator has an optional tax line. Enter the rate once and it is worked out for the whole bill.
Related reading
- How to price products in a small shop: cost, margin, rounding and when to change
- Seven billing mistakes that quietly cost a small shop money
- Profit vs cash: why a profitable shop can still run out of money
Saleva works tax out on every bill at the till and keeps the totals for the day. Get the free Android app.