The accounting here is simply not correct.
Using your example of an item that has a 15% mark up. 10 is now 11.50. That means the store owner would expense the 10 dollars - that’s a write off, he does not pay tax on it because it cost him 10 dollars. He has to pay 50% (in your example) tax on the 1.50 additional. Now… that said. This is still not how it works because if he wants to make 15% profit he’s probably having to double the price of the item to keep the store open, pay the rental, the insurance, the employees, the utilities etc. So that 10 dollar item would be 20 dollars of which he net proceeds 10 dollars and that is what he owes taxes on, but he’s not adding an additional 50% because that would be endless.