The price of the item with a reduction of the discount percentage is called sales price. We are all familiar with the term discount. Discount is an item on the sale, the store is selling the item for less price than the original price is called discount. Students can check out this article to know more about Mark-ups and Discounts Involving Tax.
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Mark-ups and Discounts Involving Sales Tax
Any materials and supplies you buy are taxable at the time of purchase. This can be an advantage because any markup you charge to your customer on the materials, supplies won’t be subject to the sales tax. Tax in Markup is equal to the calculated off the pre-tax total after factoring in any other markup calculations.
Solved Problems on Mark-ups and Discounts Involving Sales Tax
Example 1.
The list price of an article is Rs 720. The shopkeeper marks up the price and sells it at Rs 930 which includes a sales tax of 7 % on the price asked for. By what percent had the shopkeeper marked up the listed price
Solution:
Given that
The list price of an article = Rs 720
Let the new list price be Rs x
Then x + 10/100 x = 930
x(1 + 1/10) = 930
x(11/10) = 930
11x = 930 × 10
x = 9300/11
x = 845.45
Increase in list price = Rs ( 845.45 – 720)
= Rs 125.45
Hence percentage increased = 125.45/720 × 100 = 17.42%
Example 2.
A selfie stick is sold at Rs 82000 after 20% discount and 20% VAT on the marked price. Find the discount amount.
Solution:
Here
The selling price with VAT = 82000
Discount = 20%
VAT = 20%
Discount amount =?
We know that
SP = 100/100 + V% × SP with VAT
100/100 + 20 × 82000
100/120 × 82000
68333
Again
Marked price MP = 100/100 – d% × SP
100/100 -20 × 68333
= 85416
Discount amount = Marked price – selling price
85416 – 68333
= 17083
The discount amount is Rs 17083
Example 3.
Devid sold machinery items at a gain of 20% after allowing a discount of 10%. Had it been sold after allowing a 40% discount there would have Rs 1200. Find the marked price of the machinery items.
Solution:
Here
Marked price = Rs x
In case 1
Discount = 10%
Selling price = marked price – discount % of marked price
= x – 10% of x
= x – 10/100 × x
x – 1/10 × x
= 9x/10
Profit = 20%
CP1 = 100/100 + p% × SP
100/100 + 20 × 9x/10
100/120 × 9x/10
= 0.75 x
In case 2
Discount = 40%
Selling price = marked price – discount % of marked price
x – 40% of x
x – 40/100 × x
60/100
= 6x/10 = 0.6x
Loss = 1200
CP2 =SP + loss = 0.6x + 1200
But CP is same
CP1 = CP2
0.75x = 0.6x + 1200
0.75x – 0.6x = 1200
0.15x = 1200
x = 1200/0.15
x = 8000x
The marked price of the machinery items is Rs 8000
Example 4.
Roshan bought an electric bike listed at $ 41360 at a 16% discount and then a 20% sales tax charged on the discounted price. Find the amount Roshan paid for the electric bike.
Solution:
Given that,
Price listed on the electric bike = $ 41360, rate of discount = 16%
Therefore, the amount of discount = $ (41360 X 16/100) = $ 6617.6
Therefore, the selling price of the car = $ (41360 – 6617.6) = $ 34742.4.
The rate of sales tax = 20%
Therefore, the sale tax on the electric bike = $ (34742.4 × 20/100) = $ 6948.48
Therefore, the amount paid by Roshan = $ (34742.4 + 6948.48) = $ 41690
Example 5.
Leo buys pencils for $ 100 which includes a 4% discount and then 2% sales tax on the marked price. Find the marked price of the pencils.
Solution:
Let the marked price of the pencils be P.
Then, the discount on marked price = 4% of P = 4/100 P = 0.04P
The sales tax = 2% of P = 2/100 P = 0.02P
Therefore, the price paid = P – 0.06P+ 0.02P
= P – 0.13P = 0.94P
According to the problem we get, 0.95P = $100
P = $100 /0.95
= $106.38
Therefore, the marked price of the pencils is $106.38
FAQs on Mark-ups and Discounts Involving Sales Tax
1. Do you pay sales tax on discounted items?
If the item is on sale at a reduced price, or with a store coupon issued by the seller, sales tax is charged on the reduced price.
2. Does a discount come before or after sales tax?
Discounts are usually offered directly by the retailer store and reduce the amount of the sales price and the cash received by the retailer, the sales tax applies to the price after the discount is applied.
3. How did you solve markup and percentage markup?
markup = gross profit/wholesale cost