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What is the difference between tax-exclusive and tax-inclusive?

Tax-exclusive

This refers to the amount of tax paid as a proportion of the pretax value of whatever is taxed; sales tax rates are typically expressed in tax-exclusive terms.

  • For example, suppose a good costs $100 before tax and a $10 sales tax. The tax-exclusive tax rate would be 10 percent, since the tax is 10 percent of the pre-tax selling price.

Tax-inclusive

This refers to the amount of tax paid as a proportion of the after-tax value; income tax rates are often expressed in tax-inclusive terms.

  • For example, if the total cost of a good is $110 and the tax is $10, the tax-inclusive tax rate is 9 percent.
For additional information, please visit the Tax Policy Center.

 

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