8.1.16 Sales Tax

Calculator icon The calculator can be accessed on the left-hand side bar under Toolkit.

Percentages are used frequently in business transactions when calculating extra charges such as sales tax, a tip left in a restaurant, working out discounts on sale items, or specifying interest on a loan or savings account. As you know, sales tax and discounts are given in percent. To calculate the total price of a purchase, you can work out the extra charge (or discount) and then add it to (or subtract it from) the original price.

As an example, the sales tax in Oklahoma, as of 2011, was 4.5%. To work out the total price on a $148 lounge chair purchased there, you can calculate 4.5% of $148, then add that amount to the ticket price. If you just want a rough idea what the item will cost at check out, an estimation will give you an idea.

Let's make an estimate, first. 4.5% is close to 5%, and $148 is approximately $150. You can find 10% of a number very easily by dividing the amount by 10, and 5% is half of 10%, so taking half of the amount from the previous step will do the trick. This makes the added tax about equation left hand side dollar times 15 divided by two equals right hand side dollar times 7.50 and the entire purchase approximately dollar 150 postfix plus dollar 7.50 equals dollar 157.50.

You also know that you rounded both figures up—the original price, as well as the sales tax—so if you have at least this amount to pay with, it will be more than enough to make this lounge chair yours.

Using the calculator and working exactly, 4.5% of $148 is 0.045 postfix multiplication dollar 148 equals dollar 6.66.

This is reasonably close to the estimate we found above for the sales tax, which was $7.50.

The total price of for this lounge chair including Oklahoma sales tax is dollar 148 postfix plus dollar 6.66 equals dollar 154.66.


Note: You can also calculate equation left hand side 1.045 multiplication dollar times 148 equals right hand side dollar times 154.66 if you don’t want to do the calculation in two steps. The 1.045 then stands for 100 percent prefix plus of 4.5 percent equals 104.5 percent, because you are paying 100% of the price for the chair, plus 4.5% of the price additional in tax. Calculating 104.5% of the original cost, therefore, gives the final price.

This is a rectangle with a narrow shaded strip at the top. The strip represents the amount of VAT at 4.5%. The rest of the rectangle represents the cost of $148. The diagram illustrates that the total cost including the VAT is 4.5% of $148.

8.1.15 Saving for Retirement

8.1.17 Calculating Sales Tax