Practices · Observable
Tip computed on tax or on the fee
The suggested tip percentages were calculated on the total after sales tax, or after a mandatory service charge, rather than on the subtotal.
Some systems compute suggested tips on the pre-tax subtotal; others compute on the final total, which includes sales tax and any mandatory charge. Clover and Stripe Terminal compute on the total by default; Toast computes pre-tax by default. The difference is the tax rate times the tip rate, on every transaction.
This record notes which basis reporters say they observed. It is a fact about the arithmetic, not about intent.
Spot it on your receipt
- Multiply the subtotal by the percentage shown. If the suggested dollar amount is higher, the tip was computed on the total.
- Keep the receipt; the subtotal, tax, and suggested amounts are all printed on it.
Figures
Stripe Terminal computes suggested tips on the post-tax amount by default; Toast computes pre-tax by default.
Source: Stripe Terminal docs
On the record
Locations with a published claim that fits
Ordered by the number of independent reports behind the claim, keeping only claims where at least one linked report describes this practice.
No published record fits this practice yet.
Law
The federal baseline
Federally, a mandatory service charge is not a tip. It belongs to the employer unless a state or local rule, or the employer's own representation, directs it to workers.
Source: 29 CFR 531.55 · Verified 2026-09
No federal law requires or forbids a tip prompt at checkout. If money collected as a "tip" is retained by the business rather than paid to workers, the federal tip-ownership rule and federal and state deceptive-practice laws may apply.
Source: FTC Act §5; FTC v. Amazon (Amazon Flex), 2021 · Verified 2026-09