Question

How are sales tax, tip and markup related

Answer 1

one is based on the other, is just extra charge based on the one before it.

say the store manager bought some scooter, she paid $10 for it.

well, she's not going to sell it for $10 because there are other costs, shipping, storage, cleaning up the scooter while in the store before is sold, rent for the store and so on, so the scooter is going to sell for more than $10............ hmmmm say $15.

so then the manager bumped up the price by $5, that bumped up amount is the markup.

now, the manager was so nice to you, she was wearing a nice perfume, so you give her a tip, the tip is usually, not always, but usually based on the price of the product, say you give her 10% tip, so 10% of 15 is 0.15.

whenever you buy that scooter, it comes with sales tax, provincial taxation to pay for public works, so  you're not really going to pay $15 flat, it'll be $15 and some change, say tax is 20%, so you'll be buying that scooter for $15.30.

so, the scooter went from $10 to $15 due to markup to $15.15 with the tip to $15.45 if we add the 0.30 in tax.

the tip is based on the marked up price, and the tax is also based on the marked up price, though sometimes the tip is based on the after-tax price, not always.