How to add tax to an invoice
Updated · 2 min read
Charging tax on an invoice is straightforward once you know whether you need to, which tax applies, and how to show it.
1. Do you need to charge tax?
You generally charge tax only if you are registered for it:
- Sales tax (US): depends on whether you have “nexus” in a state and whether your product or service is taxable there.
- VAT (UK, EU and many others): once your turnover passes the registration threshold, or if you register voluntarily.
- GST (India, Australia, Canada, New Zealand, Singapore and others): based on turnover thresholds and the type of supply.
If you are not registered, do not add tax. Check with your tax authority or accountant if unsure.
2. Calculate it correctly
Tax is a percentage of the taxable amount:
Tax = (subtotal − discount) × tax rate
| Line | Amount |
|---|---|
| Subtotal | 1,000.00 |
| Discount (10%) | −100.00 |
| Taxable amount | 900.00 |
| Tax (20%) | 180.00 |
| Total | 1,080.00 |
If your prices already include tax, work backwards: net = gross ÷ (1 + rate). Our VAT calculator, GST calculator and sales tax calculator do both directions.
3. Show the right details
A tax invoice typically shows:
- your tax registration number (VAT number, GSTIN, ABN and so on),
- the net amount,
- the tax rate and tax amount,
- the total including tax,
- the customer’s tax number for some business sales.
Different items at different rates? Show a breakdown for each rate.
4. Special cases
- Reverse charge: for some cross-border B2B services, the customer accounts for the tax. You do not charge it, but you add a note such as “Reverse charge applies”.
- Exempt or zero-rated items: show them at 0% and say why if required.
- India intra-state vs inter-state: split GST into CGST + SGST within a state, or charge IGST between states.
Adding tax in our invoice generator
Click + Tax under the totals, choose percent or a flat amount, and click the label to rename it “VAT”, “GST” or “Sales tax”. It is applied after any discount.