Sales Tax and VAT Terms Glossary

July 2, 2026

Use this glossary alongside the Reverse Tax Calculator when a term on a receipt, invoice, or tax form isn’t clear.

Combined Rate

The total sales tax rate applied to a US purchase, adding the state rate plus any county, city, or special district rates. Combined rates vary by exact location even within the same state — a purchase in one city can have a different combined rate than a purchase a few miles away in another jurisdiction.

GST (Goods and Services Tax)

A value-added tax used in Canada (5% federal) and Australia (10% flat rate), functioning the same way as VAT — collected at each stage of the supply chain, with businesses reclaiming GST paid on their own purchases.

HST (Harmonized Sales Tax)

A Canadian tax structure that combines the federal GST with a provincial sales tax component into a single rate, used in Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and Nova Scotia. Displayed as one combined percentage (e.g., Ontario’s 13% HST) rather than two separate line items.

Input Tax Credit (ITC)

A mechanism that lets a VAT- or GST-registered business reclaim the tax it paid on its own business purchases, so the tax burden ultimately falls only on the final consumer. Also called VAT reclaim in the UK/EU.

Nexus

The connection between a business and a US state or locality that creates an obligation to collect and remit sales tax there — established through physical presence, economic activity (sales volume/transaction thresholds), or other statutory triggers. Relevant for online sellers determining which states’ tax rates apply to their sales.

Pre-Tax Price

The price of an item before tax is added — the taxable base amount. Calculated from a tax-inclusive total as: total ÷ (1 + tax rate). See the reverse tax formula doc for the derivation.

PST (Provincial Sales Tax)

A separate sales tax charged by certain Canadian provinces (British Columbia, Manitoba, Saskatchewan) in addition to the federal GST, rather than being combined into an HST rate.

QST (Quebec Sales Tax)

Quebec’s provincial sales tax, charged alongside the federal GST. Combines with GST to an effective rate of approximately 14.975% because QST is calculated on the GST-inclusive price rather than added as a flat percentage on the pre-tax price alone.

Reduced Rate (VAT)

A lower VAT rate applied to specific categories of goods or services considered essential or socially beneficial — for example, the UK’s 5% reduced rate on home energy. Distinct from the standard rate (20% in the UK) applied to most goods.

Sales Tax

A US tax added at the point of sale, calculated on top of the listed price and collected only from the final consumer (unlike VAT, which is collected and reclaimed at each stage of the supply chain). Set independently by states, counties, and cities.

Tax-Exclusive Pricing

A pricing display convention where the listed price does not include tax — tax is calculated and added at checkout. Standard in the United States.

Tax-Inclusive Pricing

A pricing display convention where the listed price already includes all applicable tax — the price you see is the price you pay. Standard for VAT (UK, EU) and GST (Australia) in most consumer contexts.

VAT (Value Added Tax)

A consumption tax used across the UK, EU, and many other countries, collected incrementally at each stage of production based on the value added at that stage, with the final consumer bearing the full cost. Included in most displayed consumer prices.

Zero-Rated / Exempt

Goods or services on which no VAT or GST is charged (in the UK, most food and children’s items are zero-rated; some goods are fully exempt with different reclaim rules). For these items, the pre-tax price equals the total price — no reverse calculation is needed.

For the underlying math behind all of these terms, see the reverse tax formula doc and sales tax vs VAT. To calculate your own pre-tax price, use the Reverse Tax Calculator.