How to Calculate Reverse Sales Tax
Unless you have a dedicated point of sale system, your business will need to calculate sales tax when a customer makes a purchase. When a customer returns an item, you'll need to calculate reverse sales tax for your records. By using a good business calculator, this mathematically tricky process will take much less time.
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Instructions
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1
Calculate the tax percentage. The tax percentage is the sum of your local and state tax along with the Federal sales tax. This number should be expressed as a decimal. For example, a 5% sales tax is expressed as .05, while 10% is expressed as .10.
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2
Convert the percentage. Add 1 to the percentage to make it usable for calculating reverse sales tax. Instead of .10, you should now have 1.10.
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3
Divide the usable percentage into the total of the receipt. If the receipt total is 100, divide that by 1.10 (100 / 1.10).
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4
Determine the tax. Subtract the result of Step 4 from the receipt total. In the above example, the result would be $90.91. Subtracting that from the total (100 -- 90.91) results in a tax of $9.09.
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5
Break down the tax. Now that you know the original, pre-tax total, you can determine the specific tax for each governing body. If the local tax is 1%, multiple the pre-tax total by the decimal percent, .01, to determine the tax that was due locally.
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Tips & Warnings
You can convert this process into spreadsheet formulas to reduce time when a customer makes a return. Use an online reverse tax calculator to make the process even simpler.
