In the calculation example, which figure is used to compute the 8.75% sales tax?

• A. $19.69
• B. $244.69
• C. $90
• D. $225

Answer: (D)

Sales tax is applied to the amount before tax. The calculation uses the base price on which the tax is computed. In this example, the amount subject to tax is 225. Multiplying 8.75% (0.0875) by 225 gives 19.69, which is the tax. Adding that tax to the base price yields a total of 244.69. The other figures represent the tax itself (19.69) and the total after tax (244.69), or a value not used as the taxable base. So the figure used to compute the 8.75% sales tax is 225.