Margin Sales Tax Calculator

Understanding Sales Tax with Profit Margin and Markup

When pricing physical goods or services, retail businesses must account for both their target profit margin and local sales taxes. Because sales tax is calculated as a percentage of the pre-tax selling price (net price), determining final checkout prices requires combining cost of goods sold, margin markup, and sales tax.

Margin vs. Markup with Sales Tax

Profit margin and markup represent different ways to evaluate profitability:

• Profit Margin: Profit as a percentage of net selling price.
• Markup: Profit as a percentage of cost of goods sold (COGS).

Key Mathematical Formulas

$$\text{Net Selling Price} = \frac{\text{Cost}}{1 - \left(\frac{\text{Margin \%}}{100}\right)}$$

$$\text{Sales Tax Amount} = \text{Net Selling Price} \times \left(\frac{\text{Sales Tax Rate \%}}{100}\right)$$

$$\text{Gross Selling Price} = \text{Net Selling Price} + \text{Sales Tax Amount}$$