A compound tax, or stacked tax, is calculated on top of a primary tax.
A compound tax will be calculated when you add additional taxes to an item on top of the primary tax. This tax is added on top of your item cost once it has the primary tax already added, rather than calculated from the untaxed item amount.
Here's an example of how compound tax is calculated. We're using an item that costs $100:
|GST (5%)||$ 5.00|
|PST (10%)||$ 10.50|
If this were not a compound tax, then the PST (10%) would only be $10.00. Since it is compound, it is added on top of the already primary taxed amount, and so is $10.50 instead.