1. Headline
  1. Headline
By John W. Schoen Senior Producer
msnbc.com

Q: How do you “back out” sales tax? On a $20,000.00  purchase (total with tax) and a sales tax of 7 percent,  how much do I send to the state? — Ruth, Tinley Park, Ill.

A: Don’t you hate these? It’s like one of those annoying questions on a standardized test. But here goes:

In this case, you need to figure out how much of that $20,000 purchase (let’s call it a car) went for the car and how much is tax. So let’s do the math:

  • Step one: Set up the problem
        Car + Tax (7 percent of Car) = $20,000  
  • Step two: Solve for "Car"
        (1) * Car + (.07) * Car = $20,000  
  • Step three: Add up the pieces
        1.07 * Car = $20,000
  • Step four: Divide both sides by 1.07
        Car = $20,000 / 1.07
  • Step five: Voila!
        Car = $18,691.59

So you “back out” the tax by subtracting the price of the car from the total $20,000 you paid, you get: $20,000 - $18, 691.59 = $1,308.41

To double check, you can see what the tax is by taking 7 percent of the cost of the car alone, or $18,691.59.

  • Tax = $18,691.59 * .07  = $1,308.41

And even if the dealer calculates it for you, it never hurts to check the math.

© 2013 msnbc.com Reprints

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

More on TODAY.com

TODAY's Takeaway
  1. TODAY; TIME

    Anchors reveal prom pics; staffers’ kids take over

    4/24/2014 9:19:26 PM +00:00 2014-04-24T21:19:26
  1. Courtesy of Jennae Zuloaga

    Surprise! Stranger captures sweet sidewalk proposal in ‘magical’ photos

    4/24/2014 10:23:52 PM +00:00 2014-04-24T22:23:52
  1. Gorditos Healthy Mexican Food

    Size them up! Babies pose next to monstrous burritos

    4/24/2014 9:27:30 PM +00:00 2014-04-24T21:27:30
  1. Kevin Lamarque / Reuters

    Girl hands her jobless dad's resume to Michelle Obama

    4/24/2014 6:14:48 PM +00:00 2014-04-24T18:14:48
  1. Anikasalsera / Featurepics.com

    Green cleaning: 9 D-I-Y natural cleaners that actually work

    4/24/2014 7:13:55 PM +00:00 2014-04-24T19:13:55