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Tip calculated on total including tax

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  • george Dec 24, 2005 12:42 PM
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Quick question - went to Max's in Oakland City Center for holiday luncheon - about 30 of us. All orders were sent by fax two days earlier, and the wait staff did a good job with everything. When the bill came, I think they added in the 18% gratuity, which was expected. However, they calculated is on the after tax total. When questioned about this, the management was polite, but said that is they way everyone does it - and we paid and left.

Nobody is angry about this - I am just wondering is this correct? I ask because I always tip based upon the pre-tax total, and sometimes use the double-the-tax-and-round-up method of calculating the tip. Have I been screwing up all these years?

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  1. We have this discussion every few weeks, it seems. The consensus has always been that there is no consensus.

    Personally, I agree with you. In addition, I believe that tipping on the before-tax amount is technically correct, so no matter what people's individual choice is on this matter, the restaurant was incorrect to take it upon themselves to calculate the gratuity on the after-tax total (and although percentage-wise it's not a big difference, on a big tab like that, it's more than a couple of dollars).

    Furthermore, since they're supposed to charge tax on a mandatory service charge like that, I wonder just how they calculated the bill... add the tax, calculate the gratuity, and recalculate the tax? That could go on to infinity!

    4 Replies
    1. re: Ruth Lafler

      The sum of an infinite series of numbers can converge on a finite limit. E.g., the series 1/2 + 1/4 + 1/8 + ... converges on 1. It would be pretty easy to calculate the infinite sum you describe in the real-world tax situation. However, the best thing to do would be steadfastly to refuse to pay tip on tax. That's what I would do, anyway. Make a scene, if necessary.

      Jim

      1. re: Jim Washburn

        Thanks for the insight - I though that I would be stuck in that restaurant calculating the tip for eternity.

        Happy Holidays!

        1. re: george

          I sent this branch of the thread to our friendly neighborhood chowhounding mathematician and he wrote back that he was happy to see that Zeno's Paradox had made it to the board. (g)

          Merry, merry!

          Link: http://www.mathacademy.com/pr/prime/a...

          1. re: Melanie Wong
            m
            Merton Barber

            I think we are quibbling over a tip of $1.50 to $ 2.oo per hundred spent in the restaurant. Do the Math. A sales tax of 8% would mean you "overtipped" by $1.60 per hundred spent. If the valet service is $7 do you leave $1, $1.40 or $2?

            On the otherhand, if they need the money that badly I wouldn't want to eat there.

            And another thought, (as Groucho said), I wouldn't want to be a menber of a country club that would have me as a member.

    2. The only place I have had service added before the tax is Chez Panisse. (Which is why I always leave extra there) Every other place has added tip on tax. In response to other posts - sales tax is added on food and beverage, income tax is taken out of tips. So tips are taxed, but not by the diner. The standard tip is now 18-20% after tax. So, of course, discretion is left to the tipper, but if you wanted to know the going rate, that's it.

      2 Replies
      1. re: eric

        My understanding is that a mandatory service charge (as opposed to a tip left at the discretion of the diner) that is placed on the bill is subject to sales tax (at least, in California).

        1. re: Ruth Lafler

          Well, technically a sales tax is a burden placed on the business by the government. So it should just be between them. Fortunately restaurants have not yet gone so far as phone companies by passing through so many fees as add-ons on the bill. I hope that we will never come to see a restaurant bill with an electricity surcharge tacked on. Well yes we were here for 3 hours but we shouldn't have to pay the full 3 hours of the electricity surcharge because the kitchen goofed up our order and we had to wait for them to get it right.

          Businesses are also not permitted by their contracts with credit card issuers to set minimum charge limits. But consumers are third party beneficiaries. I guess one could file an unfair business practice suit, but who wants to mess with that? I did once call Visa about one business who had a minimum posted, but I wasn't privy to what went on, except when I next visited the store, the posted minimum required charge sign was gone.

          In California the rule is the posted price on store shelves trumps "oh, well we raised the price." I insist they honor the posted price. Guess that is why many stores don't post prices.

      2. See link to WiseGEEK how much to tip at a restaurant. It is calculated BEFORE tax. After all, why would you want to tip on what is basically a government fee that has nothing to do with the quality of the food or service that you have received?

        Link: http://www.wisegeek.com/how-much-shou...

        1 Reply
        1. re: mshpook

          If someone tipped on the wine the way the wisegeek suggests I would be very upset. I tip on the total including the tax because it's only a couple of dollars difference. If there is a service charge added before the total I usually add enough to make the tip 20 percent of the bill. Life is too short to worry about it any more than that.

        2. Are you certain it was applied after tax? In California a "service charge" is itself subject to sales tax, which means it shuld be applied pre-tax. Sales tax on top of an 18 percent service charge would look the same as 18 percent on top of sales tax. That's small comfort, of course, since you end up paying more than 18 percent of pre-tax as a perceived "gratuity".

          If they made the Service Charge about 16.6 percent, you would end up paying 18 percent of the pre-tax out of pocket as perceived "gratuity".

          Link: http://eatingchinese.org

          1 Reply
          1. re: Gary Soup

            I am quite sure the tip was calculated after tax. Again, I am not angry, just curious about this. Given the responses, there appears to be no consensus as which is correct. Unless the service/experience is really bad, I always tip to the community standards - about 18 percent here in the Bay Area, I don't fret if a little over or under. If the service is bad/insulting I just do not tip, or will leave a small amount and sometimes a note. This does not occur very often - the last time was about 8 years ago and the waiter was a smarmy, uppity snot a Greens. I would have also complained to the manager had the food been good, but since it was not, I decided a note and a dollar would suffice. (I have been told that Greens has improved - not to the quality of their early days, but much better than the meal we had).

            Regardless, I hate almost every aspect of tipping: The endless conversations about it at the table, the endless explanations and justifications for my visitors from foreign countries, the 'uncertainty' about before tax, after tax and the proper percent, should it be included in the credit card charge or left as cash - it goes on and on. Compounding my hatred is when I hear rumors - such as the owners of well-known restaurant in the East Bay do not allow their staff to keep the tips - they actually take them and since most are recent 'immigrants' nobody complains.

            (BTW, what usually works best for me to convince foreign visitors about tipping is to let them know that there is no universal health care here in the US and staff use their tips so they can go to the doctor - not true in all cases, but it does work)

            In 3 more years, I will be moving to Europe. While I will miss many things here in the US, I will enjoy not feeling obligated to leave a tip.

          2. In South Carolina your server is taxed on gross sales which includes sales tax so yes, tip on the on the amount that includes tax.

            1. I typically tip 20% pre-tax, and find that when I'm in your situation and billed an automatic service charge, even post-tax, it's usually less than I would have left voluntarily. I am thus spared both a bit of money and any excuse to raise a fuss.

              I definitely do disagree with tipping post-tax, though. I believe very strongly that the tip should be based solely on the restaurant's charges. While I would not have made a big scene about it, I would have registered my disagreement with this manager, and probably would have told him what I mentioned above.

              4 Replies
              1. re: Will Owen

                You're right, even when the restaurant erroneously calculates the tip after adding the tax, the gratuity is always less than I would have chosen to leave. And the truth is that it is simply offensive for an American restaurant to include a service charge in the bill. If it is convenient, I make a point of sharing the fact that my discretionary tip would have been higher than the gratuity charge included in my bill.

                I've also come across this practice in a a few spas, most recently Elizabeth Arden. I received the worst pedicure of my life and was required to tip a rude and incompetent aethetician a full 20%!

                1. re: Kate

                  I hope you told management about the lack of service and that (1) you would not return, and (2) would discourage anyone else from patronizing the place, unless the lack of service was rectified to your reasonable satisfaction.

                  1. re: Karl S

                    I'm pretty certain that the OP said the service was good, even worth the amount of money but that he didn't understand the post-tax calculation.

                  2. re: Kate

                    As there were 30 of us having lunch, it was fine that the tip was included - just not on top of the tax. It has been my experience here in the SF Bay Area that when I am dining with 6 or more people, the tip is often included on the bill. Also, regardless of the number of people, if the server thinks that we are from a foreign country - for example if we are not speaking English - even with just two people dining, the tip is often added - but not in high end restaurants. This always irritates me.

                2. Tips (not gratuity/service charges) are always calculated before tax. There is no serious dispute over that, at least in etiquette circles.

                  As for mandatory fees (which are not tips), it seems the practice varies, sometimes more consistent with greed than the the logic state tax laws.

                  3 Replies
                  1. re: Karl S

                    It does seem to be the consensus that you tip based on the pre-tax total... but the credit card receipt only has the total total on it, so I always end up tipping on the full amount anyhow. As my grandpa would say, "That's how they getcha!"

                    1. re: Qwertyy

                      I can only speak for my area of the country ( Massachusetts). Our meal tax is 5%. On a $100.00 pre tax bill, the difference in tip is one dollar. Why does this topic always cause such a stir? Even if the meal tax is 10%, the difference is so minor- maybe it is the principle?

                      1. re: macca

                        Then it's not minor enough to quibble if people tip per the custom, right?

                        The issue is that those folks are merely responding to browbeating (the implication that they are not tipping enough, when they are tipping enough, rightly infuriates folks) that is inappropriate. In that context, the response is perfectly reasonable.