Removing VAT from a price (the right way)

A price that includes VAT is a locked box: the tax inside was computed on the smaller net amount, so it can't be taken back out by subtracting a percentage of the total. The fix is division.

The formula

net = gross ÷ (1 + rate). The tax is then simply gross − net. Take 120 at 20% VAT: 120 ÷ 1.20 = 100 net, 20 tax. The shortcut everyone tries — 120 − (120 × 20%) = 96 — treats the whole 120 as taxable, which it never was. The 24 it produces is wrong twice: the net is undercounted and the tax overcounted.

The same three rates, computed

Rate (example)	100 net becomes	120 gross becomes
5%	105.00	114.29 net
8.25%	108.25	110.85 net
20%	120.00	100.00 net

Rates are arithmetic examples, not any country's current rate. Check your tax authority's published figure for the sale in question.

Where each direction shows up

• Adding: quotations and invoices in markets where prices display without tax (typical US sales-tax practice).
• Removing: VAT-inclusive consumer prices (typical EU/UK display rules), platform fee statements that show totals, and receipts where the tax line must be broken out for bookkeeping.

Common mistakes

• The subtraction shortcut described above — the error grows with the rate: at 20% it's 4 on 120; at 25% it's 5 on 125.
• Treating marketplace-collected sales tax as your revenue. Platforms usually collect and remit it; your payout is net. Check your ledger before booking it.
• Rounding per line inconsistently — pick line-level or invoice-level rounding and stick to it, or your books and invoices will drift apart by cents.

Scenarios where each direction is the one you need

• Invoicing a business client at 20% VAT: you quote 600 net, they pay 720 gross. On the receipt: net 600, VAT 120, total 720 — the add direction, then the split shown as separate lines.
• Reconciling a platform payout: the statement shows fee totals including tax. Strip the tax to book the true net cost — otherwise your expense lines carry tax that isn't yours to deduct.
• Price-tag compliance: in VAT-inclusive markets the shelf price is the gross; your margin math runs on the net — compute it before a promotion, not after.

Rounding, lines, and totals

Two rounding conventions exist and both are defensible: compute tax per line and sum, or compute on the invoice total. The one rule is consistency — mixing them makes your ledger disagree with your invoices by cents that someone must reconcile by hand. The calculator keeps full precision internally and rounds only what it displays, which matches the invoice-total convention.

Compound rates and multiple taxes

This tool handles one rate at a time, by design. Stacked jurisdictions (a national VAT plus a regional levy) need an effective combined rate: a 20% VAT plus a 2% regional charge on the same base is effectively 22% on the net — compute 1.20 × 1.02 = 1.224, so divide by 1.224 to reverse it. Enter that combined figure and the split comes out right.

Common mistakes, quickly

• Using the rate from a different jurisdiction than the sale's destination.
• Booking marketplace-collected tax as both income and expense — it's pass-through money.
• Reversing tax on shipping separately when your jurisdiction taxes shipping as part of the sale.

A note on prices that "include tax for display"

Some sellers display tax-inclusive prices while the underlying listing price is net. Keep one authoritative number — the net with its rate — and derive the display figure from it, never the reverse. Storing the gross as your product price is how tax gets charged twice after a discount: the discount applies to the net, and the tax recomputes from there.

One more practical case: partial exemptions. Some categories carry a reduced rate while the invoice ships as one order. Compute each line at its own rate and sum the tax — the reverse calculator runs once per rate group, and the invoice shows each group's net and tax separately, which is what mixed-rate bookkeeping needs.

Try it

The Sales Tax & VAT Calculator does both directions side by side — type the total and rate, read the split. It also pairs with the Fee & Profit Calculator when you want the tax-free margin underneath.

Try it: Sales Tax & VAT Calculator →

Last reviewed October 28, 2026. Arithmetic reference, not tax advice.