VAT & Sales Tax
Add VAT or sales tax to a price, or take it out of a price that already includes it. With the rates of common countries, and why you divide by 1.21 instead of subtracting 21%.
VAT and Sales Tax
VAT (value-added tax) is charged at every step of the chain, but businesses get back the VAT they paid on their own purchases, so in the end only the consumer pays it. In Europe shop prices always include VAT. Sales tax, as in most US states, is charged only on the final sale and is usually added at the till, on top of the shelf price; cities and counties add their own local rates.
Because VAT is a percentage of the price without VAT, taking it back out needs a division: a price of €121 with 21% VAT is €100 + €21, so the VAT is 21/121 of the total, about 17.4%.
Adding and Removing VAT, Step by Step
VATKey Relations
Subtracting the rate from the total takes off too much: the VAT was 21% of the smaller net price, not of the total.
Sources & Verification
- European Commission, VAT rates applied in the Member States of the European Union — standard and reduced rates (NL, BE, DE, FR, ES, IT).
- Belastingdienst, Btw-tarieven — Dutch rates 21% and 9%.
- HM Revenue & Customs, VAT rates — UK standard rate 20%, reduced 5%.
- California CDTFA, Texas Comptroller and New York State Department of Taxation — state sales tax rates (local rates come on top).
Frequently Asked Questions
How do I calculate VAT?
Multiply the price without VAT by the rate: €100 × 21% = €21 VAT, so the price including VAT is €121. In one step: price including VAT = price without VAT × 1.21 (for 21%), × 1.09 (for 9%) or × 1.20 (for 20%).
How do I remove VAT from a price?
Divide by 1 plus the rate: €121 ÷ 1.21 = €100 without VAT, so the VAT was €21. With 9%: €54.50 ÷ 1.09 = €50.00. Do not subtract 21% of the total: that gives €95.59, which is €4.41 too low.
Why can't I just subtract 21% to remove VAT?
Because the 21% was calculated on the smaller price without VAT, not on the total. Of a price including 21% VAT, the VAT is 21/121 ≈ 17.36% of the total; with 9% VAT it is 9/109 ≈ 8.26%.
What are the VAT rates in the Netherlands?
The standard rate is 21%; the reduced rate of 9% applies to food, books, medicines and some services. Some goods and services are at 0% or exempt. For comparison: Belgium 21% and 6%, Germany 19% and 7%, France 20% and 5.5%, the United Kingdom 20%.
What is the difference between VAT and sales tax?
VAT is charged at every step of the production chain, but businesses reclaim the VAT on their purchases, so in the end the consumer pays it once; European shop prices include it. US sales tax is charged only on the final sale and is usually added at the checkout, with state and local rates combined (for example 8.875% in New York City).
How much is the sales tax on a $79.99 item?
Multiply by the combined rate: at 8.875%, $79.99 × 0.08875 = $7.10, so you pay $87.09. In a state with only the state rate, such as Texas at 6.25%, local taxes of up to 2% can still come on top.