Imagine you're leaving a tip in a bar or a restaurant; you typically assume a percentage, like 10% of the total price. But not all of the total price goes to the restaurant - part of it is paid to the government as tax. If you want to tip your waiter basing on the net price instead (as is customary in some countries), you've come to the right place. If you want to tip based on the gross price (in other words, the price that includes the tax), use our regular tip calculator.
Net price vs gross price
So what's the difference between the net price and the gross price? To put it simply, the sales tax or VAT.
gross price = net price + tax
But it's not the end. The tax is never a fixed amount of money - it is also expressed as a percentage (for instance, 23%). So,
gross price = net price * (1 + (tax percentage / 100))
How to use the tip from net price calculator
- Look at the bill the find out the gross price. Let's assume it's $50.
- Check, either on the receipt or online, what the tax rate is - let's say it's 23%.
- Decide on the tip you want to leave. Let's say you feel generous today and want to leave a 15% tip on the net price.
- Calculate the net price according to the formula above. It our case,
net price = gross price / (1 + tax percentage) = $50 / (1+0.23) = $40.65.
- Find the tip from the net price:
15% * $40.65 = $6.10.
- Add the tip to the gross price to find out how much you need to pay altogether. In this case,
$50 + $6.10 = $56.10.