~/tools/tax-calculator $ run accounting --tax-vat-converter
Sales Tax & VAT Calculator
Perform both tax additions and reverse tax extractions side-by-side.
A sales tax calculator performs calculations in two directions: adding tax (Total = Price × (1 + Tax%/100)), or reverse-calculating pre-tax base cost (Pre-tax = Total / (1 + Tax%/100)).
// 1. Add Sales Tax / VAT
Tax Amount: $13
Gross Price (Total): $113
// 2. Extract Tax (Reverse)
Tax Extracted: $13
Net Price (Pre-Tax): $100
// How to Add and Extract Sales Tax / VAT
Understanding consumer tax is critical for small businesses and shoppers. In many regions, store shelf prices are displayed "net" (tax-excluded) and sales tax is tacked on at checkout. In other regions, like Nepal or Europe, flat VAT values (e.g. 13% VAT) are already pre-baked into the final price. Knowing how to extract this pre-tax value is crucial for accounting and expense reports.
Mathematical Formulas:
Adding Tax: Total Gross Price = Net Price × (1 + TaxRate / 100)
Extracting Tax: Pre-Tax Net Price = Gross Total / (1 + TaxRate / 100)
Worked Example 1: Adding 13% VAT to $100
Suppose the net base price of an item is $100 and you must add a 13% tax.
1. Calculate the tax factor: 1 + (13 / 100) = 1.13.
2. Multiply net price by the factor: $100 × 1.13 = $113.
The tax amount is $13, and the gross tax-included total is $113.
Worked Example 2: Reverse Extracting 13% VAT from $113 Total
Suppose you buy a service in Nepal for $113 and want to find the price before VAT.
1. Calculate the divisor factor: 1 + (13 / 100) = 1.13.
2. Divide gross total by the factor: $113 / 1.13 = $100.
The original pre-tax net price was $100, and the VAT portion was exactly $13.
// Frequently Asked Questions
▸What is the difference between GST, VAT, and Sales Tax?
While administered differently, GST (Goods and Services Tax), VAT (Value Added Tax), and Sales Tax are all mathematical variations of consumer taxes. They are calculated using the exact same percentage formulas.
▸Why can I not extract tax by just subtracting the percentage?
This is a very common accounting mistake! If an item costs $113 tax-included at 13% tax, subtracting 13% of $113 ($14.69) is incorrect! You only paid tax on the starting net price ($100), not the final price. You must divide by 1.13 to trace back to $100.
▸What is the standard VAT rate in Nepal?
Nepal has a flat VAT rate of 13% applied officially on taxable goods and services.