Reverse sales tax calculator
Already know the tax-inclusive (gross) total and need the price before tax? Enter the gross amount and the tax rate, and this calculator backs the tax out, showing both the net price and the exact tax portion. It is useful for bookkeeping, expense claims and invoicing when only the final price is on the receipt.
When you need to reverse a tax
Most pricing situations go forward: start with a net price, apply the tax rate, arrive at the gross. But several real situations flip this:
- Expense claims and reimbursements. Your receipt shows the total you paid. Your employer or accountant needs the pre-tax figure for the reclaimable VAT or GST portion.
- Bookkeeping for tax-inclusive prices. Retailers often set shelf prices inclusive of sales tax. Recording the sale in your accounts requires splitting the gross into net revenue and tax collected.
- Invoice reconciliation. A supplier sends a gross invoice. You need the net to match it against a purchase order quoted ex-tax.
- Import and customs work. Customs invoices sometimes need to show the value before any local taxes were applied.
- Menu pricing back-calculation. A restaurant sets its prices inclusive of VAT and wants to know the net revenue on each dish.
How it works
Sales tax, VAT and GST are charged as a percentage of the net price, so to reverse them you divide rather than subtract:
net = gross ÷ (1 + rate ÷ 100) tax = gross − net
Taking the rate straight off the gross would overcount, because that percentage was originally applied to the smaller net figure.
Why “just take 20% off” gives the wrong answer
This is the most common mistake. On a £120 gross at 20% tax:
- Wrong approach: £120 − (£120 × 20%) = £120 − £24 = £96 net. This is incorrect.
- Correct approach: £120 ÷ 1.20 = £100 net. Tax = £120 − £100 = £20.
The 20% was applied to £100, not to £120. Subtracting 20% from the gross effectively taxes the tax itself, which overstates the deduction. The divide-by-(1+rate) formula undoes the tax correctly.
Worked examples
UK VAT (20%):
| Figure | Value |
|---|---|
| Gross (inclusive) | £120.00 |
| Net (120 ÷ 1.20) | £100.00 |
| VAT portion | £20.00 |
US state sales tax (8.5%):
| Figure | Value |
|---|---|
| Gross (inclusive) | $108.50 |
| Net (108.50 ÷ 1.085) | $100.00 |
| Tax portion | $8.50 |
Australian GST (10%):
| Figure | Value |
|---|---|
| Gross (inclusive) | A$110.00 |
| Net (110 ÷ 1.10) | A$100.00 |
| GST portion | A$10.00 |
Practical notes
- Combined rates. If a US receipt combines a state rate and a county rate, enter the combined rate (for example 6.5% + 2% = 8.5%) as a single figure.
- Rounding. Tax authorities often specify a rounding rule (round half up, round to 2 decimal places). The calculator shows the mathematically exact result; round to your jurisdiction’s rule before filing.
- VAT fractions (UK shortcut). For UK standard-rate VAT at 20%, the tax fraction is 1/6 — multiply the gross by 1/6 to get the VAT. This is identical to gross ÷ 1.20 × 0.20 and gives the same answer.
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