# In what order are taxes applied

Lets say we have a product that costs 100\$ (net price). This product has 3 taxes that must be applied to it: 2 percentage taxes (e.g. 17% and 20%) and one fixed amount tax (e.g. +10\$).

My question is - what math is done in this case?

Are the percentage taxes applied on the net price and summed or the first one is calculated and then the second one is done with the price we get after applying the first? When is the fixed amount tax applied? After the other two or the other two are done with net+fixed tax?

• What country and what are the taxes? Typically the country / agency would specify the order of applying the tax – Dheer Jul 25 '12 at 15:31
• This is going to be applied in a multinational environment. I thought that there is some sort of a standard... – karka91 Jul 25 '12 at 15:36
• There is no standard – littleadv Jul 25 '12 at 16:59
• When it comes to programming for financial transactions in multiple jurisdictions, you'll find there are more exception cases than generalizations or useful abstractions. Sorry. :-/ – Chris W. Rea Jul 25 '12 at 18:42

This could be legislated to be different, but typically, the tax is applied on the net and summed.

\$100 price

17% is \$17

20% is \$20

\$10 flat tax

= \$147

In the US and indeed around the world, there are very few "tax on taxes" situations. These situations are generally called out where they exist and politicians are pressured to change them; it is generally considered onerous for a government to include an amount of taxes in calculating another tax, because the government is then taxing the money you're already paying them. This is why most U.S. State and local taxes (sales taxes, property taxes, etc) are deductible from your income when itemizing deductions (the alternate "standard deduction" is an "average" amount that a person/household would be able to deduct if they itemized all lower-level taxes they had paid).

So, most taxes, especially sales taxes/duties/tariffs, are all levied on a "pre-tax" or "subtotal" amount. In your example, all three of those taxes would be calculated on the \$100 "subtotal" amount, before any other tax is added, and then those amounts are added to the subtotal to produce the grand total (of \$147 as Alex shows).

• +1 & re: "few". I can point to a nearby example: Québec, a province here in Canada, applies provincial sales tax (TVQ) after the federal sales tax (GST/TPS) has been added to the price. See Taxe de vente du Québec (in French) and Sales taxes in Canada .. you're also right about pressure to change. See Quebec Sales Tax Harmonization "Quebec will undertake to remove the GST from the QST base (no more “tax on tax”)." – Chris W. Rea Jul 25 '12 at 18:37