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I had a meal in a restaurant and the total before tax was $17.00. The sale tax (7.5%) is $1.28 and the total after-tax is $18.28. The minimum suggested tip says 18% ($3.29) on the receipt. This is 18% of the price after tax, while 18% of the total before tax should be $3.06. Though the difference is slight, I am confused that the restaurant suggested I pay a tip on the tax part of my bill. I ended up leaving a $2.55 tip, which is 15% of the price before tax since I feel the service is average.

My questions:

  1. Do restaurants usually expect customers to pay a tip on the tax part of the bill?

  2. If not, is this restaurant's suggestion on tip amount a bit unethical or questionable?

  3. Is paying a 15% tip before tax considered rude when the minimum suggested amount is 18% after tax?

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  • 26
    suggested tips are not binding. They can calculate them however they want and you're free to ignore their calculations.
    – Kate Gregory
    Nov 28, 2022 at 21:51
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    @KateGregory, thank you! I usually fell embarrassed when paying less than what they suggest. Perhaps my embarrassment is unnecessary.
    – Zuriel
    Nov 28, 2022 at 21:56
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    @Zuriel that's exactly the point of the suggestion - to try and put you in a position where you'd feel uncomfortable. They're essentially trying to guilt you into giving them your money for no reason. There's absolutely no requirement to tip at all.
    – littleadv
    Nov 28, 2022 at 21:57
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    – Willeke ♦
    Nov 30, 2022 at 6:37

8 Answers 8

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53

You aren't "paying a tip on your tax". All the percentages and amounts are just 'suggestions". You can ignore them and pay whatever you want and make up your own percentage calculations.

Why are they doing this? For the US style approach where the suggestions are printed on a receipt for you to sign the answer is simple. It's because they want you to give them more money.

For the case outside the US where the server enters the total into a POS terminal, then the POS terminal doesn't know the amount before tax. It has no way to calculate a percentage of any other amount.

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  • 17
    Although more likely it's just lazy programming than any real thought in trying to get a larger tip.
    – pboss3010
    Nov 29, 2022 at 14:41
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    @pboss3010 - As a software developer, I doubt it... It's no easier to calculate the pre-tax total times a percentage than the post-tax total times a percentage...
    – ScottishTapWater
    Nov 30, 2022 at 12:34
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    @ScottishTapWater "lazy" meaning "didn't think about it," not "trying to save time."
    – Esther
    Nov 30, 2022 at 15:32
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    @Esther is it lazy to not learn enough to become an expert on the entirety of all possible combinations and permutations of local and federal tax laws that could come into play when writing an EPOS system? People often fail to understand that "simple" things are seriously complicated when you are a programmer, since you need to consider all possible use cases... I didn't become a programmer to get a degree in tax law...
    – Aron
    Dec 1, 2022 at 6:30
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    There's no need to blame "lazy programming." If the programmer asks the restaurant whether to show a suggested tip on the full total or on the total minus tax, what do you think the restaurant is going to say?
    – Kyralessa
    Dec 21, 2022 at 13:57
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Personally, (as an American) I have always tipped on the total of the bill. The way printed receipts are laid out, this seems to be encouraged because the big number at the bottom will be the total, with the line under that for writing the tip (presumably based on the total right above it). I don't think there's a nefarious scheme to get you to tip more so much as it's just easier to look at the big number at the bottom rather than try to pick out the pre-tax subtotal (in smaller numbers, a couple of lines further up), and whoever designed the automatic tip suggestion did the same thing: grabbed the total, not the subtotal.

But as everyone says in the comments, this is all just a suggestion anyway.

Personally, though, I err on the side of "too high", especially if it's a restaurant I frequent. My reasoning is this: if I go out to eat twice a week = 104 times a year and if I tip $2 extra each and every time that's $208/year. Eating out 104 times per year and $2 extra is surely well above average but even so, $208/year is not going to lead to my early retirement or a vacation home in Tahiti so really why sweat it. It'll probably make some server slightly happier and costs me little enough to not matter in the long run. I think it's kind of a "penny-wise, dollar-foolish" concept. Plan hard for big investments like your house, your car, your retirement fund, etc, and don't worry over much about a little extra on a tip, is my personal philosophy. I typically tip 20%, and round up to the nearest dollar, because shaving off an extra 32 cents or whatever here and there is really not worth the bother.

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    I don’t think your opening statement is accurate. I dunno what “everyone” does, but I’ve always understood it to be a percentage of the pre-tax subtotal, not the with-tax total. Certainly, every time I’ve looked at the suggested amounts, the stated percentage is only accurate if based off the pre-tax amount. I’ve lived up and down the East Coast of the US, plus a fair amount of time in SoCal...
    – KRyan
    Nov 29, 2022 at 15:56
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    @KRyan Hm, I'll think of a way to rephrase that. I don't think I have ever personally seen someone pick out the subtotal for a tip, but it's all a bit anecdotal, short of finding some poll data.
    – JamieB
    Nov 29, 2022 at 15:58
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    When I was young, I was taught “twice tax,” which of course is a percentage of the pre-tax amount, so that’s why I tend to look to the subtotal. Of course, I habitually round up anyway, and a tip on the tax is going to be around that order of magnitude in most cases.
    – KRyan
    Nov 29, 2022 at 16:02
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    @KRyan Ohhh, I feel like I have heard that phrase before too -- "twice tax". Probably not a great rule of thumb for travelers though, because restaurant taxes can vary quite a bit from place to place (even within the same state). You'd be tipping 12% in some places and 20% in others.
    – JamieB
    Nov 29, 2022 at 16:16
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    Even in my hometown, we can’t use that any more because it’s 17.5% and a standard tip here is really more like 20% these days so it feels cheap.
    – KRyan
    Nov 29, 2022 at 16:18
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USA is a big outlier in that prices are usually published without tax. In Europe, you wouldn't ever see the price without tax, the price including tax will be the price quoted on the menu, and anyone giving a ten percent tip will calculate based on the number (including tax) on the bill.

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    Also, Europe is more into unions and living wages, and less into tipping.
    – MSalters
    Dec 1, 2022 at 8:23
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As others have said, this is a suggested tip. Having known people who have worked in food service, I've been told to tip on the total amount, since in some locales in the United States, restaurant workers are paid literally $2.13 per hour by the restaurant and every penny counts.

In Canada, when paying with a card, the credit card machine brought to the table can add a percentage tip, which is always on the total amount. (The machine never sees the subtotal before tax, since the server only enters the total.) This is also the case for such machines in the United States, but there it is substantially more common to have the card taken away and for you to write the tip in on the slip instead of having a machine brought to the table. Thus, tipping on the total amount is customary in at least some places.

Ultimately, these are suggested values, and you can leave whatever you like. Gratuities are legally optional. I usually leave 20% if the service is good, since it's not that much money for me but it adds up for the server. However, again, you can do something else if you like or choose to tip on the subtotal.

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    One important thing to note is that minimum wage always applies, it's just allowed to be decreased down to a couple dollars if tips make up the difference. Workers never make only $2.13/hr - but some restaurants might only be paying that portion of their wage.
    – Ezekiel
    Dec 1, 2022 at 3:26
  • That's actually true only for very few places in the US. In California, for example, minimum wage is around $15, no matter tips or not.
    – littleadv
    Dec 1, 2022 at 21:21
  • In Texas and many other U.S. states, the tipped wage is $2.13 an hour. Yes, if you don't make $7.25 (or the local minimum wage) or more per hour with tips, then the employer has to cover it, but then they typically just fire you (because of at-will employment) immediately thereafter so they don't have to anymore after that.
    – bk2204
    Dec 1, 2022 at 22:27
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    The map in the article is very telling. With very few outliers these are the same States that were willing to go to war for their right to own people.
    – littleadv
    Dec 1, 2022 at 22:52
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It varies greatly based on the POS system that they're using and how they have it configured. Modern POS systems can be incredibly complicated, and restaurant owners rarely have time to figure out how to customize them. Some owners configure their system and specify what suggested tip percentage to display and which number to base it on. Many others are doing good to get the blasted thing to work in the first place and leave it with the manufacturer's default settings. I've been to places where the owner wasn't even aware that their new POS system printed a "suggested tip" line on the receipt, or where two different registers were set to use two different suggested tip percentages. In some places, you can see the suggested tip percentage change based on how much you spent, what you ordered (liquor sometimes assumes a higher tip), or how large your party is (large groups sometimes result in a 30-35% suggested tip). They're all just arbitrary suggestions, so never feel bad ignoring them and going with whatever amount you feel is right.

In any case, a good general rule is to just take the sales tax amount and double it (I'll go triple if the tax rate is under 7%). That will land you in normal tipping range and multiplying by two is much easier to do in your head than calculating percentages.

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Tipping is a personal choice. How you come to the number doesn't really matter. What matters in the USA is that virtually all wait staff expect some tip. The typical suggestion is 10-20%, or no tip if it was a really bad experience. If you think your tip was fair, then your tip was fair. The social morés of tipping can be difficult, so if you have trouble consider this solution from Dick Solomon.

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    Mr. Pink has some words about tipping too.
    – sourcream
    Nov 29, 2022 at 19:15
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    Re: "The typical suggestion is 10-20%": Wait, what? I've never heard a suggestion less than 15%. (See e.g. snopes.com/fact-check/the-tipping-point .)
    – ruakh
    Nov 30, 2022 at 21:38
  • @ruakh A Snopes "Did X say Y" fact check doesn't help make your point. But consider that in Dec 2018, Consumer Reports put restaurant servers at 10-25%. I know a lot of people claiming in the last 10 years or so, loudly usually, that anything less than 15 or even 20 is bad and you should feel bad. But that's recent; 10% was the etiquette standard for decades. Today, tip averages are about 17%, but they vary wildly, with about 1 in 5 not tipping at all. Summing it down to a narrow 5% range is perhaps not representative of reality.
    – user27701
    Dec 1, 2022 at 0:07
  • In other words, tip whatever you want, and make it a personal matter, because it is.
    – user27701
    Dec 1, 2022 at 0:08
  • @27701: Re: "A Snopes 'Did X say Y' fact check doesn't help make your point": Sure it does, if you read the text. :-) Specifically, it links to multiple instances of large groups expressing outrage at the idea that it might be OK to tip only 10%, and it mentions multiple instances of X having said or endorsed the statement that you should tip at least 15%. Your own link doesn't really support your statement that "The typical suggestion is 10-20%, or no tip if it was a really bad experience", since it gives a range of 10-25% "depending on service" -- so, 10% for a really bad experience!
    – ruakh
    Dec 1, 2022 at 0:28
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I don't know that the restaurant has put this much thought into things, but if you tip on the before-tax amount, you must now add up three things (before-tax total, tip, and tax) to get the final amount you are paying. If you tip on the after-tax amount, you only need to add up two things.

People generally do the math for tipping by hand, so keeping it simple is probably more reliable and less intimidating.

(One of the reasons for putting that recommended tip on the bill is to reduce friction and make it more likely for you to pay that amount. Calculating a 10% tip in your head is easy, 15% is a little harder, but 18% no one will do without pulling out a calculator.)

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    Well, not quite because the total is on the receipt already so it's still just adding up two things if you multiply the subtotal by 15% instead of the total.
    – Azor Ahai -him-
    Nov 30, 2022 at 22:11
  • @AzorAhai-him- I guess the flow of basing things off the big number is too ingrained in me to have realized that. I think I have to sit in the corner and reflect on this.
    – IceGlasses
    Nov 30, 2022 at 22:47
  • We're on Travel.SE so you could probably ask a question about the best corner to sit in in New Zealand ...
    – Azor Ahai -him-
    Nov 30, 2022 at 22:58
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I always heard the exact opposite ~ That you’re not supposed to tip on tax.

However, I almost always tip 25% of the total amount of the bill ~ Unless there was a very good reason to leave a lower tip.

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