>Not knowing Canadian law, it appears the original calculation is incorrect. The way you have done it, you have additional taxes because you are calculating 9.5% of the original $500 + the 5% federal tax.
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>Shouldn't you calculate each tax only on the 500? (500 * 5%) + (500 * 9.5%)

No, it is one tax over another. Al pointed out a link which explains it. This is why the ratio is somewhat different then just adding both taxes. This is also why it is extremely difficult to find the proper formula to obtain the precised amount from the original in reverse. I think the only way to achieve that would be to benefit from the orginal amount. But, I'll wait for more replies as I provided more info this morning to those I have received.