6.06 Sales tax and tip
Two ways that percentages are commonly used in the U.S. are when calculating the amount of sales tax we will need to pay for purchasing an item and when calculating the proper tip to leave the waitstaff at a restaurant. Interestingly, we will find that in different parts of the United States the amount of tax that we will pay for the purchase of goods or services can vary. In addition, while tipping for good service is a common practice in the U.S., there are other countries that do not engage in the practice of tipping at all.
Tips
This image below, from mint.com, displays the tipping customs of many countries around the world. You can see that tips vary from $0$0 to $20%$20%.
Tipping is an amount of money left for the staff, in addition to paying the bill, as a sign that we appreciate good service. Tips are common in the service industry, but in other sectors like government receiving a tip can be considered illegal. So, it is important to know the customary amount to tip for different services and who we should not offer a tip to.
Worked examples
Question 1
David is paying for a meal with lots of friends. They received great service, so he is giving a $20%$20% tip. The meal came to $\$182.30$$182.30. How much will he leave as a tip?
Think: I need to work out $20%$20% of the total meal charge. $20%$20% as a fraction is $\frac{20}{100}$20100.
Do: $20%$20% of $\$182.30$$182.30
| $20%$20% of $\$182.30$$182.30 | $=$= | $\frac{20}{100}\times\$182.30$20100×$182.30 | $20%$20% is $\frac{20}{100}$20100 and of in mathematics means multiplication. |
| $=$= | $\frac{20\times182.30}{100}$20×182.30100 | ||
| $=$= | $\$36.46$$36.46 |
So David should leave $\$36.46$$36.46 as a tip.
Sales Tax
In most of the United States, sales tax is added on to the marked sales price of an item at the point of sale, it is an amount to be paid in addition to the marked price of goods or the stated price of a service. In other countries, sales taxes like the GST (goods and services tax) is included in the marked price ticket. So, similar to being aware of tipping customs, it is useful to know the manner in which sales tax is collected in the location at which you are buying goods or services. We will look briefly at an example where the sales tax is added on to the ticketed price. In the United States, there are only five states that do not collect general sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Sales taxes in the U.S. (including local taxes) can range between 4% in Guam and 12% in Arkansas. Sometimes particular goods or services like Hotels, Alcohol or Cigarettes may be subject to extra or higher taxes than other items.
Question 2
The sales tax on nonprescription drugs in South Dakota is 4%. Calculate how much tax you need to pay if some nonprescription drugs cost $26.80 before tax. Round your answer to the nearest cent.
Think: I need to work out $4%$4% of the total sales charge. $4%$4% as a fraction is $\frac{4}{100}$4100.
Do: $4%$4% of $\$26.80$$26.80
| $4%$4% of $\$26.80$$26.80 | $=$= | $\frac{4}{100}\times\$26.80$4100×$26.80 | $4%$4% is $\frac{4}{100}$4100 and of in mathematics means multiplication. |
| $=$= | $\frac{4\times26.80}{100}$4×26.80100 | ||
| $=$= | $\$1.07$$1.07 | ||
| So the total you need to pay is | $=$= | amount before tax + tax | |
| $=$= | $\$26.80+\$1.07$$26.80+$1.07 | ||
| $=$= | $\$27.87$$27.87 |
So total you will need to pay is $\$27.87$$27.87 for your nonprescription medication.
Practice questions
Question 3
Sharon has finished her meal at a restaurant, but received bad service. She will only be leaving a $10%$10% tip. Help her calculate the tip if the meal, before sales tax, came to $\$36.60$$36.60.
question 4
The sales tax on clothing in Indiana is $7%$7%. Calculate how much tax you need to pay on a dress if it costs $\$40.60$$40.60 before tax. Round your answer to the nearest cent.
question 5
Tobias works at a restaurant that automatically charges $25%$25% service to groups of $8$8 or more people. He has just served a group of $8$8 people. Before sales tax, their meal came to $\$238.51$$238.51. How much of a tip is Tobias going to get from this bill? Round your answer to the nearest cent.