Does Square calculate tips before or after sales tax?

[The_White_Hart]

The three pre-calculated suggestions for tips are nice, but there's one big flaw: the tip includes the sales tax in its calculation.

That's a big no-no, and my customers complain about it.

For example, if the bill is $50.00, and the suggested tip percentages are 15%, 20%, and 25%, then the suggested tips should be exactly $7.50, $10.00, and $12.50. But they're not. They include our local sales tax (at 8.6%) in the calculation, which bumps up all the tips by a proportional amount. Some customers really take offense at this, almost accusing me of cheating them or of trying to sneak in a larger tip.

This creates a lot of ill will with my customers -- but it should be an easy fix. Any ideas, or any hope that Square will fix this flaw?

[Feedback2016]

I did not realize this was happening, how about cutom amounts like 7%, 12% and 17% if, for instance your tax is 3%. Not the best fix, but it would make your customers happy.

[Feedback2016]

Can I take my reply back? 🙂 I just realized why that would not work. We need some kind of subtotal feature.

[Sean]

@The_White_Hart @Feedback2016 Thanks for taking the time to reach out with your feedback. To get going, you're absolutely correct, Square currently applies tips to the total amount of a sale, including any applicable tax.

Having said that, we’re constantly working to improve our products based on the feedback we receive from our sellers. I’ll be sure to pass along this feedback to our product liaison team. For more details on that process, check out this thread.

[Sunlight]

Along the same line, I am going to use my Square Reader for TIPS only.  Will it charge tax for that?  There must be a way to disable the tax calculation.

[Sean]

@Sunlight - You can definitely disable taxes if you'd like. You can find more details here.

[HRB]

Why can't Square just program in an option to disable sales tax on tips?!?!?!?! I just discovered this thread and this has got to be illegal. I am not sure how Square can get around making a seller collect sales tax on tips when a tip is not legally taxable inthis manner. I am going to research this with the California Board of Equalization as this sounds like a tax nightmare that I need to identify ASAP before I set myself up for an audit. Perhaps I need to rethink using Square as our POS for our restaurant. I have been perusing the Square message boards all morning for answers to all my questions and this is by far the most alarming.

I am updating my post as I just went in to calculate a few of my transactions from yesterday and it appears that our customers' tips are not being taxed. However, I don't know if I am just looking at the wrong thing or perhaps this doesn't apply to us. Anyone else with a restaurant or cafe that is experiencing the same?

[VanKalkerFarms]

@HRB

This thread is talking about calculating the tips based on the total purcahsed AND Tax meaning calculating the tip on a $100 purchase with $10 tax on the $110, so if someone wanted a 20% tip it would be $22 not $20 if it was just on the purchase.

 Square does not collect Sales Tax on the amount tipped.

[Sean · Accepted solution]

Hey everyone. 👋  I've got some great news to share. We just recently launched the ability to chose whether you want calculate tips before or after tax. You can find this option nestled under the tipping settings in the Square Point of Sale app. Here's a screenshot:

[The_White_Hart]

Hooray! 

[NorthSide]

A related issue is calculating tips BEFORE applying a discount.  More sophisticated customers know to tip on a pre-discounted amount.  But the calculation provided by Square is post-discount.  So if I give a 10% discount on a $200 tab, the tab drops to $180.  The tips go down as well  From 30 to 27 for 15%; from 40 to 36 for 20%; and from 50 to 45 on a 25% tip.  Doesn't make the staff happy and, like pre or post tax, seems to be an easy fix.

[Tom]

Thank you for flagging this, @NorthSide. I can certainly see how being able to control tips based on a pre-discounted amount would help out your employees. While I don't have a workaround for this right now, I'll be sure to share your post with our Product Liaison team. We'll circle back with any developments on this.

[Igg]

Hi North Side,

I just started using Square and encountered same issue. I also noticed that your post is from May. Well, it's August now. Were you able to find any workaround for this until Squre puts a toggle?

Best,

Igg

[The_White_Hart]

Same problem here, but more so. We often collect a large deposit of 50% or more of the total purchase, which screws up the tips (and the sales tax) massively. It's bad enough when offering a 10% discount, but it's completely unworkable if the customer has prepaid 50% or 75% of the bill ahead of time. The taxes and the suggest tip amounts are nowhere near accurate.

In short, there's no way to apply a deposit (or down payment, prepayment, discount -- call it what you want) without messing up both the sales tax and the suggested tipping amounts. 

[LuckyBird]

When can we expect to see this option for Discounts?  It is becoming a big problem and as far as I can see, many other square users are having this issue as well.  We would appreciate the help.  Thanks!

[Helen]

Thanks for your post @LuckyBird. I don't have an update at this time, but I will share your interest in this with our Product Team.

If this feature becomes available in future we'll update this thread to let you know! 

[LuckyBird]

@Sean Are you guys currently working on making this option available for Discounts as well?  This would be very very very very very convenient if you could.  Our shop does not apply Sales Tax to our services, only to our store items - however, when we take the clients down payment off of their total (Discount) it subtracts it from the total which effects our sales tax on store items.  Right now we have to run two separate transactions for every client which makes things harder to track, inconvenient for our clients, and opens up room for error with our employees running the counter.  Please let me know what can be done.  Thanks!

[puka]

Hi @LuckyBird - Thanks for circling back. Unfortunately, we still don't have an ETA on when or if this feature would be implemented. However, we can assure you that our Product Team is continuing to track feedback for it. We will make sure to update this thread as news comes along.

[ramonashummus]

Hi Sean, I have a similar question as it relates to discounts.how does square calculate tips -- before or after discounts are applied ? I would like to set it up so that suggested  tip values are based on pre-discounted prices

thanks

[Mallory1]

If tips are calculated after taxes.. how does one figure out how much taxes to pay out. What does square do with the taxes? Very confused. Help 

[Richard_M]

Mathematically, the collected tax is what you would report, and if that includes tips, you are paying (and collecting) taxes on the tips.

Example:

1) Tips Post-tax with $10 bill amount; $1 Tips; 10% Tax

$10 (bill) + $1 (tax on $10) + $1 (Tips) = $12. Tax collected: $1

2) Tips Pre-tax with $10 bill amount; $1 Tips; 10% Tax

$10 (bill) +  $1 (Tips) + $1.1 (tax on $11)  = $12.1. Tax collected: $1.1