How to Add and Remove VAT or Sales Tax
Adding tax is straightforward, but removing it trips many people up. This guide explains both directions with a clear worked example.
What is the VAT & Sales Tax Calculator?
In add-tax mode, the tax is the net amount multiplied by the rate divided by 100, and the gross total is net plus tax. In remove-tax mode, the net amount is the gross amount divided by one plus the rate as a decimal, and the tax is gross minus net. Use the rate that applies in your situation.
How to use it
- Choose Add tax if your amount excludes tax, or Remove tax if it already includes tax.
- Enter the amount and the tax rate percentage.
- Read the tax amount plus the net and gross totals.
Worked example
Add tax: net 100 at 20% gives tax 20 and gross 120. Remove tax: gross 120 at 20% gives net 100 and tax 20.
How much tax is in a gross price of 120 at a 20% rate?
The tax is 20 and the net price is 100. Divide 120 by 1.20 to get the net price of 100, then subtract it from 120 to find the tax of 20. Simply taking 20% of 120 would wrongly give 24.
Frequently asked questions
What is the difference between add and remove tax?
Add tax starts from a price without tax and adds it on. Remove tax starts from a price that already includes tax and works backwards to the price without tax.
Why is removing tax not just subtracting the percentage?
Removing tax divides by one plus the rate, because the percentage was applied to the smaller net amount, not to the gross amount.