AtomicTax

# How to Calculate Sales Tax for Your Online Store

Running an online store isn’t all about bells, whistles and excitement. Sometimes you have got to go handle the not so exciting recurring task of calculating and filing your sales tax every month or quarterly.

For a quick recap: Sales tax is a form of consumption tax that adds a small percentage to the total sale amount of a product or service. These taxes are collected at the point of a purchase on your store and are remitted to the state and/or local government periodically for public use.

Figuring out how to calculate sales tax for purchases on your online store can be confusing and time consuming, that’s why we shared in this article two simple methods to help your sales tax calculation next time you need to.

## How to Calculate Sales Tax

I. Determine the sales tax rate for each state you are registered to pay taxes.

II. Transform the tax rate in percentage into a decimal, i.e. 7.25% / 100 becomes 0.0725

III. Multiply the price of product or service by tax rate. See formula below

``(Product price) * (Sales Tax Rate) = Total Sales Tax``

For example, in New Jersey, the sales tax rate is 6.625%. Calculating the sales tax for a product that costs \$80 would result to:

``80 [Product price] * 0.06625 [Sales Tax Rate] = \$5.3 [Total Sales Tax]``

## How to calculate the total transaction amount for a purchase

Next, to calculate the total transaction amount for a purchase, you’d need to add the selling price of the product to the total sales tax required.

``(Product price) + (Total Sales Tax) = Total Transaction Amount``

Let’s use the same example from above where the price of the product is \$80, and the total sales tax we got was \$5.3

``80 [Product price] + 5.3 [Total Sales Tax] = \$85.3 [Total Transaction Amount]``

Get it now?

via GIPHY

Another method to calculate the total amount of a purchase without having to first calculate the total sales tax is to multiply the product price by 1 plus the sales tax rate, see formula below:

``(Price of the product) * (1 + Sales Tax Rate) = Total Transaction Amount``
``Example: 80 [Product price] * 1.06625 [1 + Sales Tax Rate] = \$85.3 [Total Transaction Amount]``

Calculating sales tax on your own can quickly become a manual and confusing process. You are expected to keep track of all your sales tax nexus locations, ensure you’re charging the right amount, and worst still you also have to stay up to date with complex and ever-changing tax rules.

What if you had a system that handled every bit of sales tax compliance on your online store all automatedly. From calculating accurate sales taxes for every purchase on your website real time on the checkout, while taking note of the tax rates for each state, county and city, to keeping track of your economic nexus states in all the states and also filing your tax returns automatically to relevant state tax bodies so you never miss a tax deadline.

Introducing AtomicTax, the cloud-based software that handles all your sales tax needs in one place.

Want to be the first to try out this software when it launches? Click here to sign up for early access.