//height is set to height of outer div, outer div HAS PADDING

HTML

<div id="layout"><div id="sidebar"></div><div id="content"></div></div>

CSS

*{float:left;}
#layout {padding:10px;background:#fad400;}
#content {padding:10px;background:#333;height:100%}
#sidebar {padding:10px;background:#040;}

JavaScript

//height is set to height of outer div, outer div HAS PADDING
$("#sidebar").css({'height':($("#layout").outerHeight()+'px')});