Discount, tax, tip and margin calculator

Markup is not margin

Both measure profit, but against different bases. Markup = profit ÷ cost; margin = profit ÷ selling price. Buying at 80 and selling at 120 is a 50% markup but only a 33.3% margin.

How to use the discount, tax, tip and margin calculator

Pick the calculation, then fill in the boxes that appear. Discount takes the original price and a percentage off. Sales tax adds a tax percentage to a price, and reverse sales tax takes a price that already includes tax and shows what it was before. Tip takes the bill, a percentage and the number of people, and price from margin turns a cost and a target margin into a selling price. Markup and margin takes a cost and a selling price and shows both percentages. The result shows the headline answer with the working under it.

Discounts and sale prices

sale price = original × (1 − discount ÷ 100) you save = original × discount ÷ 100

A jacket priced at 80 with 25% off saves 80 × 0.25 = 20, so the sale price is 60. Discounts stack by multiplying, not adding: 20% off and then a further 10% off is 0.80 × 0.90 = 0.72, a total of 28% off, not 30%. If you know the sale price and the original, the discount is (original − sale) ÷ original.

Adding and removing sales tax

To add tax multiply by 1 plus the rate: 60 with 7% tax is 60 × 1.07 = 64.20. To take tax back out of a total, divide instead of subtracting the percentage, because the tax was charged on the pre-tax price. A receipt total of 107 at 7% tax was 107 ÷ 1.07 = 100 before tax, with 7 of tax. Subtracting 7% of 107 would give 99.51, which is wrong. Apply a discount before tax when the shop does: 200 with 25% off and 8% tax is 200 × 0.75 × 1.08 = 162.

Tipping and splitting a bill

Enter the bill, the tip percentage and the number of people to see the tip, the total and each person’s share. A 60 bill with an 18% tip is a tip of 10.80 and a total of 70.80; split four ways that is 17.70 each. Tipping customs differ widely by country and by venue, and a service charge may already be on the bill, so check before you add one. Whether the tip is worked out before or after tax is up to you; the calculator uses the amount you type.

Markup versus margin

markup = (price − cost) ÷ cost margin = (price − cost) ÷ price

Buying at 80 and selling at 120 gives a profit of 40. The markup is 40 ÷ 80 = 50% and the margin is 40 ÷ 120 = 33.3%. Margin can never reach 100% but markup has no upper limit. A 100% markup is only a 50% margin. Confusing the two is a classic way to underprice: someone who wants a 40% margin and adds 40% to cost ends with only a 28.6% margin.

Setting a price from a target margin

To hit a margin, divide the cost by 1 minus the margin. With a cost of 80 and a 40% margin the price is 80 ÷ 0.60 = 133.33, which is a markup of 66.7%. The price-from-margin mode does this for you. Remember that costs such as delivery, fees and returns come out of the margin, so a quoted margin is usually larger than what is left at the end.

Worked examples

• Sale then tax: 80 with 25% off is 60; with 7% tax the checkout shows 64.20.
• Backing out tax: a 107 total at 7% tax is 100 before tax.
• Group dinner: 240 bill, 15% tip, 6 people: 276 in total, 46 each.
• Shop pricing: cost 80, margin 40%, price 133.33.

Percentage change and “percent off” in reverse

If an item cost 80 and now costs 100, the price rose 25% (20 ÷ 80). If it then falls back from 100 to 80, that is a fall of only 20% (20 ÷ 100). The same 20-point gap is a different percentage because the base changed. This catches people out in sales: a price raised by 25% needs a 20% discount to return to where it started, and a price cut by 20% needs a 25% rise.

Pricing checks for small sellers

If you sell for 100 and your cost is 60, the margin is 40% and the markup is 66.7%. If a marketplace takes a 15% fee, you keep 85 and the margin drops to (85 − 60) ÷ 85 = 29.4%. Always work out margin after fees, shipping and returns. A discount hurts more than it looks: with a 40% margin, a 10% discount cuts profit from 40 to 30 per 100, a 25% fall in profit for a 10% fall in price.

Common mistakes and limits

• Adding discounts together. Successive discounts multiply.
• Subtracting tax as a percentage of the total. Divide by 1 plus the rate instead.
• Treating markup as margin. They only match at zero.
• Mixed tax rates. Some goods are taxed at different rates or not at all; the calculator applies one rate to the whole price.