Sales tax

Definition

Sales tax is a consumption-based tax imposed by governments on the sale of goods and, in some cases, services.

What is sales tax?

Sales tax is a form of indirect tax that is typically collected by the seller at the point of sale and then paid to the government. The tax is usually calculated as a percentage of the retail price of a product or service and is added to the total amount paid by the consumer.

Sales tax rates vary widely depending on the jurisdiction. Different levels of government may impose their own sales tax rates, and within a country or state, local jurisdictions may have their own rates.

Sales tax systems can be destination-based or origin-based. In a destination-based system, the tax rate is determined by the location where the goods are consumed, while in an origin-based system, it is based on the location of the seller.

Sellers are responsible for paying the collected sales tax to the relevant tax authority. This involves periodic reporting and payment, and failure to do so can result in penalties.

If you want to find out how much sales tax you are supposed to be paying, try our sales tax calculator today.

Example of sales tax

Let’s say Sarah goes to a local electronics store to purchase a new smartphone. The price of the smartphone is R800, and the sales tax rate in her area is 8%.

  1. Calculating sales tax: Sarah needs to calculate the sales tax on the smartphone. She multiplies the price of the smartphone by the sales tax rate to find the amount of sales tax.Sales tax = Price of smartphone Ă— Sales tax rate = R800 Ă— 0.08 = R64
  2. Total cost: To find the total cost of the smartphone including sales tax, Sarah adds the sales tax amount to the price of the smartphone.Total cost = Price of smartphone + Sales tax = R800 + R64 = R864

So, Sarah pays a total of R864 for the smartphone, including R64 in sales tax. The store will then remit the sales tax collected to the appropriate government authority.

Ready to grow your business?

Clever finance tips and the latest news

Delivered to your inbox monthly

Join the 95,000+ businesses just like yours getting the Swoop newsletter.

Free. No spam. Opt out whenever you like.

Our offices:

Disclaimer: Swoop Finance helps South African firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans or other finance products ourselves. We can introduce you to a panel of lenders, equity funds and grant agencies. Whichever lender you choose we may receive commission from them (either a fixed fee of fixed % of the amount you receive) and different lenders pay different rates. For certain lenders, we do have influence over the interest rate, and this can impact the amount you pay under the agreement. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Swoop Finance can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness. Swoop Finance (Pty) Ltd is registered with CIPC in South Africa (company number 2023/820661/07, registered address 21 Dreyer Street, Cape Town, South Africa, 7708).

© Swoop 2025

Looks like you're in . Go to our site to find relevant products for your country. Go to Swoop