How do I calculate a 20% tip on a $45 restaurant bill?

Use the formula with P = 45 and r = 20: T = 45(1 + 20/100) = 45 \times 1.20 = 54. So you pay $54 total, which is $45 plus a $9 tip. Many people estimate by finding 10% first (moving the decimal: $4.50) and doubling it ($9).

Is sales tax the same everywhere in the US?

No, sales tax rates vary by location. Different states have different rates—some places have no sales tax at all, while others charge over 10%. You can look up your local tax rate online or check a receipt from a store near you to see what rate applies where you live.

How can I estimate my total cost when shopping without knowing the exact tax rate?

Look up your local sales tax rate (usually 5–10% in the US) or round to 10% to be safe. Then multiply the price by 1.10 to estimate the total. For example, a $100 purchase with 10% tax would cost about $110. This gives you a quick estimate before checkout.

What's the difference between a 15% tip and a 20% tip on an $80 bill?

With a 15% tip: T = 80(1 + 15/100) = 80 \times 1.15 = 92, so you pay $92. With a 20% tip: T = 80(1 + 20/100) = 80 \times 1.20 = 96, so you pay $96. The difference is $4, so a 20% tip costs $4 more than a 15% tip on an $80 bill.

Sales Tax and Tip

Calculate the total final amount you pay when adding a percentage—such as sales tax or tip—to the original price of any item.

T = P\left(1 + \frac{r}{100}\right)

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What each symbol means

What Sales Tax and Tip takes

Symbol	Meaning
$T$	The total amount you pay, which includes the original price plus the added tax or tip.
$P$	The original price before adding any tax or tip, measured in dollars (or your currency).
$r$	The percentage rate as a whole number—for example, 8 for 8% tax or 20 for a 20% tip (not 0.08 or 0.20).

When to use it

Use this when you know an original price and need to add a percentage to find your total cost.

Level

Usually taught in: Pre-Algebra

Worked examples

1. Find total cost with sales tax

Problem

A shirt costs $35 and the sales tax is 8%. What is the total price?

$T = 35\left(1 + \frac{8}{100}\right)$
Substitute the original price $P = 35$ and tax rate $r = 8$ into the formula.
$T = 35(1.08)$
Evaluate the fraction $8/100 = 0.08$ , then add to get $1 + 0.08 = 1.08$ inside the parentheses.
$T = 37.80$
Multiply 35 by 1.08 to get the total amount you pay, including tax.

Answer: $T = 37.80$

To find the total, we substitute the known values into the formula and calculate step by step. The shirt originally costs $35, and the 8% tax adds $2.80, giving us $37.80 total. This is faster than calculating the tax separately and then adding it.

2. Calculate tip on a restaurant bill

Problem

A restaurant bill is $48.75 and you want to tip 20%. What is the total amount including tip?

$T = 48.75\left(1 + \frac{20}{100}\right)$
Substitute the bill amount $P = 48.75$ and tip percentage $r = 20$ into the formula.
$T = 48.75(1.20)$
Calculate $20/100 = 0.20$ , then add to get $1 + 0.20 = 1.20$ inside the parentheses.
$T = 58.50$
Multiply 48.75 by 1.20 to find the total amount including tip.

Answer: $T = 58.50$

The restaurant bill is $48.75 before tip, and adding a 20% tip means multiplying by 1.20. This gives $58.50 total, which includes a $9.75 tip. The formula handles decimal amounts perfectly, just as it does with whole numbers.

3. Calculate a phone bill with monthly fee, data charges, and tax

Problem

Your phone plan costs $50 per month. Data overage is $0.15 per gigabyte. You used 8 GB of data this month. If there's a 5% government tax on the total, what do you pay?

$\text{Cost before tax} = 50 + 0.15 \times 8 = 50 + 1.20 = 51.20$
First, calculate the total cost before tax by adding the $50 monthly fee and the data overage charge of $0.15 × 8 =$ 1.20.
$T = 51.20\left(1 + \frac{5}{100}\right)$
Now apply the tax formula with $P = 51.20$ (the cost before tax) and $r = 5$ (the tax percentage).
$T = 51.20 \times 1.05 = 53.76$
Multiply 51.20 by 1.05 to get the final amount you pay after the 5% government tax is added.

Answer: $T = 53.76$

This problem has two stages: first we combine the monthly fee and data charges to get the subtotal, then we apply the tax formula to that subtotal. The formula works the same whether you're adding sales tax in a store or a government tax on a phone bill. Your total bill is $53.76.

Common mistakes

Where Sales Tax and Tip usually goes wrong

The mistake	Why it is wrong	The fix
Writing $T = P \times r / 100$ (for a $100 item with 8% tax: $T = 100 \times 8 / 100 = 8$ )	This only gives the amount of tax, not the total cost including the original price.	Always use $T = P(1 + r/100)$ to include the original price. The 1 is critical—it accounts for the full original price before adding the percentage.
Using $r = 0.08$ instead of $r = 8$ for an 8% tax rate, then writing $T = P(1 + 0.08/100) = P(1.0008)$	The formula expects $r$ to be a percentage as a whole number, not a decimal. If you use 0.08 and divide by 100, you only add 0.0008, which barely changes the price.	Use $r = 8$ for 8% tax or $r = 20$ for a 20% tip. The formula divides by 100 for you, so always give the percentage as a whole number.
Calculating the percentage twice (for a $50 bill with 20% tip: $T = 50 \times 1.20 \times 1.20 = 72$ )	You apply the formula once, not multiple times. Multiplying by $(1 + r/100)$ twice is like charging a 20% tip, then charging another 20% tip on top of that.	Use the formula exactly once: $T = 50(1.20) = 60$ , not $T = 50(1.20)(1.20)$ .

Tips and when to use something else

Use this formula for any percentage markup: sales tax, tip, shipping fees, delivery charges, or sales commissions—they all follow the same pattern of adding a percentage to an original amount.
Don't use this formula for discounts or sales. If something is 20% off, use $T = P(1 - r/100)$ instead to subtract the discount.
Quick mental math: to find 10% of a price, move the decimal point left one place. For $80, that's $8. Then for 20%, double to get $16. For 15%, combine: $8 +$ 4 = $12.
Always verify whether $r$ is given as a percentage (8 for 8%) or a decimal (0.08 for 8%). If it's a decimal, use the simpler formula $T = P(1 + r)$ instead of the version that divides by 100.

Related formulas

Percent of a NumberPercent of a Number finds how much you get when taking a percentage of a quantity—essential for tips, discounts, grades, and everyday calculations.Discount and Sale PriceCalculate the sale price after subtracting a discount percentage from the original list price of the item you're buying.Percent ChangePercent change calculates how much a quantity has increased or decreased, expressed as a percentage of its original value.

Frequently asked questions

How do I calculate a 20% tip on a $45 restaurant bill?: Use the formula with $P = 45$ and $r = 20$ : $T = 45(1 + 20/100) = 45 \times 1.20 = 54$ . So you pay $54 total, which is $45 plus a $9 tip. Many people estimate by finding 10% first (moving the decimal: $4.50) and doubling it ($9).
Is sales tax the same everywhere in the US?: No, sales tax rates vary by location. Different states have different rates—some places have no sales tax at all, while others charge over 10%. You can look up your local tax rate online or check a receipt from a store near you to see what rate applies where you live.
How can I estimate my total cost when shopping without knowing the exact tax rate?: Look up your local sales tax rate (usually 5–10% in the US) or round to 10% to be safe. Then multiply the price by 1.10 to estimate the total. For example, a $100 purchase with 10% tax would cost about $110. This gives you a quick estimate before checkout.
What's the difference between a 15% tip and a 20% tip on an $80 bill?: With a 15% tip: $T = 80(1 + 15/100) = 80 \times 1.15 = 92$ , so you pay $92. With a 20% tip: $T = 80(1 + 20/100) = 80 \times 1.20 = 96$ , so you pay $96. The difference is $4, so a 20% tip costs $4 more than a 15% tip on an $80 bill.

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Reviewed 2026-09-18