# Two-tier sales tax calculation

=IF(A1<=limit,A1*tier1,limit*tier1+(A1-limit)*tier2)

To calculate a sales tax with two tiers (brackets), you can use a basic IF formula. In the example shown, the formula in C5, copied down, is:

=IF(B5<=limit,B5*tier1,limit*tier1+(B5-limit)*tier2)

where "limit" (F6), "tier1" (F4), and "tier2" (F5) are named ranges.

### How this formula works

At the core, this formula relies on a single IF function. The logical test is based on this expression:

`B5<=limit`

When B5 (the current amount) is less than the limit (10,000), the test returns TRUE and the IF function calculates a tier 1 tax only, and returns a final result with this:

`B5*tier1`

However, when the amount is greater than the limit (10,000), the logical test returns TRUE. The IF function then runs an expression to calculate tax for both tier 1 and tier 2 taxes:

limit*tier1+(B5-limit)*tier2

Translation:

- Calculate tier 1 tax by multiplying the limit (10,000) by the tier 1 tax (6%).
- Calculate tier 2 tax by subtracting the limit from the amount, and multiplying the result by the tier 2 tax rate (10%).
- Add tier 1 tax to tier 2 tax and return a final result.

### Without named ranges

Named ranges can make formulas easier to write and read. The same formula without named ranges looks like this:

=IF(B5<=$F$6,B5*$F$4,$F$6*$F$4+(B5-$F$6)*$F$5)

References to limit, tier1, and tier2 are locked to prevent changes when the formula is copied down the table.

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