How do I add sales tax to a price?
On top, it’s the price times your rate; inside, work back.
- For
- Put the right tax on a bill, whether it goes on top or is already inside.
- When
- Every time you price or bill a job
Try it
A 500 price at a 10% rate, tax on top: 50 tax, 550 in all.
On top, tax = price × rate; inside, tax = price × rate ÷ (100 + rate).
Know if your price has tax in it, and say so.
Worked out
| Rate | Tax on top | Total | Tax inside |
|---|---|---|---|
| 5% | 5.00 | 105.00 | 4.76 |
| 10% | 10.00 | 110.00 | 9.09 |
| 15% | 15.00 | 115.00 | 13.04 |
| 20% | 20.00 | 120.00 | 16.67 |
Easy to get wrong
- Taking the rate off a price with tax in.
- Charging tax before you’re signed up.
- Prices with and without tax mixed up.
- No tax line on the invoice.
The tool for it
Questions
What rate do I use?
The one where the work is done; type in your own. Check the rule where you work.
Do I charge tax on labour?
Some places tax labour, some only parts. Check the rule where you work.
Should my prices include tax?
Either, if the bill shows it. Say which on every quote.
Why can’t I take 10% off the total?
Because the tax was worked out on the price before tax, which is smaller.
Do I round the tax?
To the cent, on the bill’s total, not on each line.
What if I charged the wrong rate?
Send a corrected invoice and keep both. Check the rule where you work.
Do I keep the tax I collect?
No, it’s owed, so set it aside the day it comes in.
Does a deposit carry tax?
It can; it depends on when tax is due. Check the rule where you work.