How to Add Tax to a Quotation Correctly

A client who budgets for 100,000 and then finds tax on top won't be pleased. Showing tax clearly protects your margin and builds trust. Rules differ by country and business, so confirm what applies to you with an accountant or your tax office.

Inclusive or exclusive

Tax-exclusive prices show tax on a separate line and add it to the total. Tax-inclusive prices already contain the tax. Business clients are commonly quoted exclusive prices, and consumers often expect the final price. Whichever you use, state it plainly.

Calculating tax

To add tax: Tax = Price × Rate.

For 10,000 at 13%, the tax is 1,300 and the total is 11,300.

To find the tax inside an inclusive price, do not simply take 13% of the total:

Tax = Total × Rate ÷ (100 + Rate)

For a total of 11,300 at 13%: 11,300 × 13 ÷ 113 = 1,300.

Discount first, then tax

A discount usually reduces the amount being taxed:

1. Subtotal: 10,000
2. Discount of 10%: −1,000
3. Taxable amount: 9,000
4. Tax at 13%: 1,170
5. Total: 10,170

Check local rules if you offer unusual discount arrangements.

Show the rate and label

Write the tax name and percentage: "VAT (13%)" or "GST (18%)". If you're registered for tax, your registration number may be needed on some documents. If you aren't registered, don't charge or label an amount as tax.

Set a default

If you normally charge the same rate, set it as your default to avoid forgetting it. In Quotation Maker App Offline, you can set a default tax rate and change it on any quotation.

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