“I base my tips on how good the service is.”
You're eating at a restaurant with friends. You get into a discussion about how much tip to leave. One of your friends says it should be 15% of the bill, but you like to be more flexible.
I base my tips on how good the service is.
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When you want to talk about the level or amount of a quality, you use the phrase "how ___ something is". For example, if it's been raining a lot and the ground is really wet, you can say:
I can't believe how wet it is.
Another example is when you meet someone who's famous and seems unfriendly, but he is actually a nice guy when you meet him:
Your choices and opinions all come from somewhere. When you want to talk about the reasons for your ideas, you can say that you've "based them on" something.
For example, when a teenager decides which university to go to, she might choose "based on" the school's reputation, the cost, which school her friends are going to, the school's website, etc.
Here are some other examples:
I based this recipe on a dish I had at a barbecue restaurant in Texas.
I don't see why they awarded it to this one. What did they base their decision on?
I base my opinion of a person on how they treat the people around them, not on how much money or education they have.
"Service" is the experience that you have when you go to a store or restaurant and communicate with the employees or owners.
When the experience is good, you call it "good service". Good service means that the employees were polite and friendly, answered your questions, and worked quickly.
A "tip" is "extra" money that you pay a waiter, hairdresser, taxi driver, etc. for doing their job well.
In the U.S., there are many services that you're expected to tip for. You're not forced to pay tips, but it's very rude not to.