How can sales tax alter the size of the tip you leave at a restaurant?

a.
A tip of a given percentage (such as a 20% tip) will be larger if calculated after tax than if calculated before tax.
b.
The tip becomes part of the bill as a whole, so you have to increase the sales tax by a corresponding amount.
c.
You do not have to double-calculate a percentage on any purchases, so you should pay for tax or a tip but not both.
d.
A standard tip is 15% to 20% of the sales tax.

1 answer

The correct answer is:

a. A tip of a given percentage (such as a 20% tip) will be larger if calculated after tax than if calculated before tax.

When a tip is calculated based on the total amount after sales tax, it results in a larger tip compared to calculating it based on the pre-tax amount. For example, if the meal before tax costs $50 and the sales tax is $5, the total bill would be $55. A 20% tip applied to the total bill would be $11, whereas 20% of the pre-tax amount ($50) would only be a $10 tip.