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Q:

# How is tax added to a price?

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Tax is added to the price of a product by first determining the tax amount by multiplying the tax rate by the product price, and then adding the tax amount to the product price, according to the Basic-mathematics.com. Tax rates are determined by each state.

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Tax Foundation states that there are two possible tax rates that can be applied to a product price: state sales tax and local sales tax. State taxes are charged by 45 states while local taxes are charged in only 38 states. The highest combined sales tax, according to Tax Foundation, can be found in Tennessee, with a total combined state and local tax rate of 9.45 percent.

## Related Questions

• A:

The formula for calculating income tax is the product of the total amount of taxable income multiplied by the tax rate, according to the Internal Revenue Service. The formula to account for multiple marginal tax rates requires multiplying the total amount of money earned in each successive bracket by the tax rate and adding the values together.

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Lump sum tax is tax equal to a specific amount, not depending on an individualâ€™s income or any other considerations, explains About.com. This tax is viewed as efficient because it is equal for all individuals and does not discourage higher-income earners.

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A tax exemption is a certain amount of money that can be subtracted from a taxpayer's total adjusted gross income for the entire year. The two types of exemptions allowed are personal exemptions and exemptions for dependents. These exemptions reduce the amount of income that is taxable.