CONCEPT: The question is based on basics of Percentage
The Marked Price(M.P) and tax in total is 20$
9% is taxed on the MP.
Separating MP and Tax we have
MP= 20/1.09= 18.35 (approx),
Thus the amount of tax paid= 20-18.35=1.65$(approx)
Based on the values of marked price and tax we have just calculated, only I and II remain valid.
III is invalid because sales tax is more than 1.50$.
Thus, I and II both are correct. Hence Option (C)