Sunday, March 18, 2012

Figuring Sales Tax (Are You Paying To Much)

When you sell an item such as snacks and sodas through a vending machine or a snack box the local sales tax has to be figured out of the money you bring in.

If you’re not careful you can be paying taxes on top of taxes. My CPA once gave me this formula to help me from paying a tax on top of a tax when I figured my sales tax.

Lets assume your weekly sales are $5000.00 and your state sales tax is 5%. You are going to take your sales times 5 (Sales Tax rate) that equals 25,000. Then you are going to take 25,000 and divide it by 105 (Sales tax rate + 100) and that equals $238.10.

Now take $5000.00 minus $238.10 that equals $4761.90 and that is your actual sales. If you took $5000.00 times 5% you would be paying $250.00 in sales tax.

Total Sales $5000.00

5000.00 x 5 (Sales Tax Rate) = 25000.00

25,000.00 / 105 (Sales Tax Rate + 100) = 238.09523 round to 238.10 (Actual tax)

$5000.00 – $238.10 = $4761.90 (Actual sales)

I hope that these two examples are clear. It is never easy to discuss numbers in an article such as we have tried to do here.

Summary

Paying taxes is something we must all do and should feel like we have done something that helps our country to continue to be a great country to live in.

On the other side of the equation, over paying taxes has never been something that I have felt compelled to do.

The equation I have given above makes it possible to be fair to yourself and to the state you live in. Use the equation above and feel good about yourself.

With the extra money in your pocket at the end of each month take your’ loving spouse out for a meal.

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