Sales Tax

The calculation of sales tax is very easy as it involves very simple concept of percentage.

The government of every country needs money the following:

  • to meet their administrative expenses,
  • to execute social welfare and development schemes,
  • to meet the expenses on salaries of its employees, etc.

One of the many sources of collecting money (revenue) by the government from the citizen on the sale of goods within their respective territories. This purpose is known as sales tax.

It is levied by a government on the sale of different commodity. The sales tax is the sum of money a buyer pays over and above the price of a commodity to buy it.

The rates of tax on purchase of different commodities within a country are different. Also, the rates of tax on the same commodity in different country are different. Some commodities may be be exempted from sales tax by a government. Sales tax is one of the many forms of indirect taxes that a government imposes on its citizens.

If P be the printed price or marked price of a commodity, the rate of sales tax be r% and S be the selling price (i.e., the price a customer has to pay) then

S = P (1+r100)  and

Sales Tax = S - P = Pr100