How this calculator works
The VAT model assumes a registered business with full recovery of tax on its business purchase. Canadian GST/HST can use the same arithmetic where a full input tax credit is available. Choose whether the entered cost and selling price already include the selected rate. Select a known pricing pair to recover the other measures. You can enter a tax rate or infer it from reference prices before and after tax. The same rate is used wherever tax is calculated, with no exemptions or compound tax layers.
Formula
Pre-tax revenue = tax-inclusive price / (1 + tax fraction). Profit = pre-tax revenue - net cost basis. Margin = profit / pre-tax revenue. Markup = profit / cost. Tax collected = pre-tax revenue x tax fraction. Input credit = net cost x tax fraction. Net tax = tax collected - input credit.
Worked example
$100 of net cost with a 20% margin gives $125 before tax, $25 profit and 25% markup. At 13% tax the customer pays $141.25 and tax on the sale is $16.25. Full purchase-tax recovery gives a $13 input credit and $3.25 net tax.
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Frequently asked questions
Is sales tax part of profit?
Tax collected for remittance is separated from revenue. A recoverable purchase tax is separated from cost. Tax you cannot recover belongs in the cost basis.
Does the default 13% cover all of Canada?
No. Enter the applicable rate for the product and place of supply. Rates, exemptions and recoverability differ by province and transaction.
Can I work back from a tax-inclusive price?
Yes. Select a pair containing selling price and choose tax included. The calculator extracts tax before calculating margin and markup.