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Financial Percentages: Sales Tax, Tips, and Discounts

5 min readGrade 7 · Financial Literacy

Your meal costs $20. The tax is 5%. The tip is 15%. You see a 25% discount on a sweater. Can you calculate each of these mentally? In Grade 7, you can.

Sales tax

Tax is added to the purchase price. If the item costs $100 and tax is 5%, the tax amount is 0.05 ×$ 100 = $5. The total is$ 100 + $5 =$ 105. Shortcut: $100 × 1.05 =$ 105.

Tip

A tip is a percentage of the bill, typically 15–20%. If the bill is $50 and you tip 20%, the tip is 0.20 ×$ 50 = $10. Total:$ 50 + $10 =$ 60. Mental math: 20% of $50 is 1/5 of$ 50, which is $10.

Discount

A discount reduces the price. If a $50 shirt is 30% off, the discount is 0.30 ×$ 50 = $15. The sale price is$ 50 − $15 =$ 35. Shortcut: $50 × 0.70 =$ 35 (paying 70% of the original price).

KEY VOCABULARY

Sales tax — A percentage of the purchase price added to the total.

Tip — A percentage of the bill given as a gratuity.

Discount — A percentage reduction from the original price.

Sale price — The price after a discount is applied.