If you are installing a traditional bath tub, set the tile after the tub is installed. The tub will have a small vertical lip on the wall sides. The tile flashes over this lip to keep water from getting behind the wall (the face of the tile actually "hangs" over this lip). The joint between the tub and the first tile is left open for about 1/8" and then caulked with a flexible sealant. In the past this joint was grouted, but modern sealants are much better. The color of the sealant should match that of the tile grout.

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