Removing tax is not subtracting the rate
To strip 18% tax from a tax-inclusive total of 118, you divide by 1.18 to get 100 — you do not subtract 18%, which would wrongly give 96.76.
This trips people up on expense claims constantly. The inclusive amount is 118% of the base, so the base is the total divided by 1 plus the rate, and the tax is whatever remains.
Sales tax, VAT and GST are not identical
US sales tax is charged only at the final retail sale. VAT and GST are charged at every stage of production, with businesses reclaiming what they paid on inputs, so the net burden still lands on the end consumer but the collection is spread across the chain.
The arithmetic is the same for a consumer either way. The difference matters if you run a business, because it determines whether the tax you paid on supplies is recoverable.
Prices quoted with and without tax
In most of Europe, Australia and India, displayed retail prices already include tax — what you see is what you pay. In the United States and Canada, prices are typically shown before tax, which is added at the register and varies by state, county and sometimes city.
This is why the same product can ring up differently in two neighbouring towns, and why online checkouts often cannot show a final price until an address is entered.
Frequently asked questions
Does this work for GST and VAT? +
Yes. GST, VAT and sales tax all use the same arithmetic; only the rate and the rules about what is taxable differ.
How do I find the tax rate from a receipt? +
Divide the tax amount by the pre-tax subtotal and multiply by 100. If tax was 8.25 on a subtotal of 100, the rate is 8.25%.
Is shipping taxable? +
It depends on the jurisdiction. Some tax delivery charges, some exempt them when stated separately, and some tax them only if the goods themselves are taxable.