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What is a sales tax?
A sales tax is a consumption tax imposed by the government on the sale of goods and services. A general sales tax is levied at the point of sale, collected by the retailer, and passed on to the government. A business is liable for sales taxes in a given jurisdiction if it has a nexus there, which can be a brick-and-mortar location, an employee, an affiliate, or some other presence, depending on the laws in that jurisdiction.
What is the definition of reverse sales tax?
Reverse sales tax isn't something you pay—it's something you calculate. For example, when you're going over your business receipts, you may want to know how much is actual income and how much is sales tax. Instead of calculating sales tax on the purchase amount, you have to figure out sales tax backward and subtract it from the total.
Why is a reverse sales calculator useful?
A reverse sales tax calculator is useful if you itemize your deductions and claim overpaid taxes on your tax returns. The only thing to remember about claiming sales tax and tax forms is to save every receipt for every purchase you intend to claim.
How is reverse sales tax calculated?
The formula is relatively simple. Divide your sales receipts by one, plus the sales tax percentage. Multiply the result by the tax rate, and you get the total sales-tax dollars. Subtract that from the receipts to get your non-tax sales revenue.
For example, suppose your sales receipts are $1,100, and the tax is 10 percent. Divide $1,100 by 1.1 and you get $1,000. Multiply that by 10 percent, and you get $100 sales tax, so your non-tax receipts are $1,000. You enter $1,000 in "sales" in your journal and $100 in "sales tax payable."