Price Before Tax Calculator

Strip tax out of a tax-inclusive price.

Calculate the net price before tax from a tax-inclusive figure, for any VAT, GST or sales tax rate.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Price including tax

Tax rate

Price before tax

$100.00

at 20.0%

Net (excluding tax)$100.00

Tax$20.00

Gross (including tax)$120.00

Wrong method (subtract %)$96.00

Subtracting 20.0% from the gross gives $96.00, which is wrong: the tax was calculated on the smaller net figure.

How the Price Before Tax Calculator works

Going backwards from a tax-inclusive price is where the common error lives: subtracting 20% from a VAT-inclusive figure does not remove the VAT. You have to divide by 1.20, and the difference is not trivial.

Also known as: pre-tax price calculator · remove tax from price · net price from gross · inclusive tax calculator

How the figure is built

Extracting tax from a tax-inclusive price is division: net = gross ÷ (1 + rate). The tax is gross − net, or equivalently gross × rate ÷ (1 + rate).

Multiplying the gross price by the rate gives the wrong answer, and it is wrong in the expensive direction. At 20%, a $120 gross price contains $20 of tax, not $24, the multiplication overstates it by 20%.

Numbers on it

A $58.99 shelf price at 20% VAT. Net is 58.99 ÷ 1.2 = $49.16, and the VAT is $9.83.

The multiplication error gives 58.99 × 0.2 = $11.80 of VAT and a net of $47.19, nearly two dollars low. On a business calculating margin from that figure, every margin in the catalogue is understated by about 4%.

At 25% the gap widens: a $100 gross price contains $20 of tax by division and $25 by multiplication, a 25% overstatement.

Where the figure deceives

The calculation assumes a single rate applies to the whole price. Where an order contains items at different rates, standard-rated goods and zero-rated books, for instance, the extraction has to be done per line rather than on the total.

Shipping is another complication. In many jurisdictions delivery takes the tax rate of the goods it delivers, which for a mixed basket means apportioning it, and a single-rate extraction on the order total will be slightly wrong.

Acting on it

Calculate every margin from the net figure. A business that prices tax-inclusive and calculates margin on the gross is overstating every margin by the tax rate, which at 20% means a reported 55% margin is really 46%.

Build the extraction into the reporting rather than doing it by hand. It is a single division and it is the kind of step that gets skipped under time pressure, at which point the numbers quietly stop meaning what they say.

Why inclusive pricing is the default in some markets

Consumer protection rules in the UK, EU, Australia and much of Asia require the price shown to consumers to be the price paid, which makes tax-inclusive display mandatory rather than a choice. The United States is the significant exception, where prices are conventionally shown net and tax is added at checkout.

That difference has a real commercial effect on cross-border selling. A US shopper seeing a UK site's inclusive price perceives it as 20% more expensive than an equivalent US listing, without recognising that the US price will gain tax at checkout.

For a business selling into both, the answer is usually to display inclusive prices to markets that expect them and exclusive to those that do not, which most platforms support. Showing one convention to everyone systematically disadvantages you in one of the two markets.

There is one more place the division matters: refunds. Refunding a tax-inclusive price means refunding the tax with it and reclaiming that tax from the authority, and the amount reclaimed has to be the extracted figure rather than the multiplied one.

Businesses that get the extraction wrong on sales usually get it wrong on refunds in the same direction, which means over-claiming tax back, an error that is considerably more uncomfortable to correct than an understated margin.

Where to go next

The Price Before Tax question rarely arrives on its own. These are the ones that usually come with it:

Price After Tax Calculator — Gross price from a net figure and a tax rate.
Reverse VAT Calculator — The VAT inside a gross price, done correctly.
Tax-Exclusive Price Calculator — Net revenue from a gross price, correctly.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

How do I remove tax from a price?

Divide by (1 + rate). At 20% VAT, a £120 gross price is 120 ÷ 1.20 = £100 net, with £20 of VAT. Subtracting 20% would give £96, which is wrong by £4.

Why doesn't subtracting the percentage work?

Because the tax was calculated on the smaller net figure, not the larger gross one. Subtracting the rate from the gross applies it to the wrong base, and the error grows with the rate.

What is the VAT fraction?

A shortcut for the tax portion of a gross price. At 20% it is 1/6, so £120 × 1/6 = £20 of VAT. At 5% it is 1/21. Useful for quick mental checks.

When do I need the net price?

For accounting entries, margin calculations and VAT returns. Margins must be calculated on net figures, using gross prices on one side and net costs on the other overstates margin substantially.