# Money - Calculating Tax

One of the last things you’ll need to know before you can fully calculate your bill at a store is how to calculate tax on your total order. Tax varies based on location and based on what you are buying. Sales tax is charged on most items (clothing, electronics, etc.), while food tax is charged on most items you buy at the grocery store, like fresh fruit and vegetables, meat, cereal, etc. Food tax is usually less than normal sales tax. To find out what sales and food tax are in your area, you can either use an online search engine to find it, or you can look at the next receipt you get from a store—-it will tell you near the bottom of the receipt what the sales tax is. For our examples, we’re going to use 10.25% as the sales tax.

There are also two methods in calculating sales tax, similar to the methods used to calculate discounts. You should use the one that makes the most sense to you, or the one that best answers the question you are asked. We’ll show you both methods here.

The first method involves calculating the amount (in money) that you would pay in tax, and then adding it to the original price. We’re going to use our original price of $19.99, and we’re going to use 10.25% as the sale tax.

First, we would set up the multiplication problem. In order to do this, you would take the percent and place it over 100 (using 100 as the denominator). You would then multiply this fraction by $19.99, like this:

Once you figure out the multiplication and division, you get 2.048975. Obviously, you cannot have this many decimal places when working with money, so you need to round to the hundredths place. Once you round this number, your amount would be $2.05. $2.05 is the amount you would pay in tax. In order to figure out the total amount you’d pay, you need to add $19.99 and $2.05 to get $22.04. $22.04 is your total amount owed, including tax.

The other method would use the following steps and it would give you the total amount owed without taking the step to find the tax amount separately from the total amount.

First, think about the multiplication. Normally we multiply a percent by the original amount, and then add those two amounts together. However, logic says that you know you’re already paying 100% of the original amount, then another 10.25% in tax. Therefore, you can use 110.25% in your multiplication calculation, and this number would be your total amount owed. To use this method, you would automatically add 100% to the percent of sales tax, and use that to multiply by each time. The multiplication set up would then look like this:

After calculating the multiplication and division, you would get $22.038975 as your answer. Obviously, you cannot have that many decimal places when dealing with money, so you need to round to the hundredths place. Once you round the number, you would get $22.04 for your answer. Notice that this is the same as the first answer, once we added the original price to the tax amount.

If you are asked to calculate the amount of sales tax you are charged, you’ll want to use the first method. However, if you only need to figure out the final amount paid, you can use either method and come up with the same answer—using whatever method makes more sense to you.