Compound Tax (often refereed to as Stacked Tax or Tan-On-Tax) is a tax calculation where the total cost of the product or service is taxed at one rate, and then the total of that amount, including the first tax amount, is taxed a second time. In Quebec and Prince Edward Island (PEI) in Canada, the General Sales tax is calculated and added to the price of the product. Then the Quebec or PEI Provincial Tax rate is calculated for that total amount, which is added to the previous total.
Example
Below is an example of a compound (stacked) tax calculation using Quebec Canada Tax Rates where the QST is stacked on top of the GST.
Product = $100
GST = 5%
QST = 9.975%
| General Calculation | Actual Calculation |
|---|---|
| Product Price | $100 |
| + Product Price x GST | + $100 x 0.05 |
| + (Product Price x GST) x QST | + ($100 x 0.05) x 0.09975 |
| Total | $115.47 |
Step-by-step guide
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