How to Calculate a Tip, Sales Tax and VAT

Tips, sales tax and VAT are all percentages added to a price, and a few rules cover them all. The usual mistake is taking tax off a price the wrong way.

Working out a tip

Ten percent of any amount is the amount with its decimal point moved one place left, so 10 percent of 85.50 is 8.55. Double it for 20 percent, or add half of it for 15 percent. Customs differ: in some countries a service charge is already included, and in others tipping is expected. Many people tip on the amount before tax, but some tip on the total.

The Tip Calculator works out the tip, the total and what each person pays when you split the bill, and can round each share up.

Adding tax to a price

Multiply the price by one plus the rate. With 20 percent VAT, multiply by 1.2, so 100 becomes 120. In the United States sales tax is usually added at the checkout, while in most other countries VAT is already included in the price shown.

Taking tax out of a price

This is where the mistake happens. To find the price before 20 percent tax from a total of 120, divide by 1.2 to get 100. Taking 20 percent off 120 gives 96, which is wrong, because the tax was 20 percent of the smaller price, not of the total. The Sales Tax & VAT Calculator does either direction and shows the tax amount.

Things to check

• Tax rates change and some goods have lower rates, so look up the rate that applies.
• Rounding happens at different points in different shops, so a receipt can differ by a cent.
• For other percentage questions, such as a discount or a change between two prices, use the Percentage Calculator.