Why do Restaurants Calculate Gratuity on Tax

This article explains the concept of calculating gratuity on tax and why it is important for restaurateurs to know about this.

Why do restaurants calculate gratuity on tax?


At some restaurants, you may see a gratuity tax added to your bill on top of a service charge, and it’s legal and often required.

We all know that tax is one of the most complicated things that we need to deal with when running a business. However, there are many mistakes that can be made when calculating taxes. Some of them can be very costly and even fatal.

For example, if you’re a restaurateur and you don’t pay the correct amount of taxes, you may end up having to pay a penalty or a fine. And that could be very bad for your business.

But you can avoid these problems by following a few simple steps. Let’s walk through them together.

Depending on the state sales tax law, a gratuity can become a taxable sale. When an establishment includes a gratuity as part of the bill, you only pay gratuity tax.


A tip is added at the end of your bill, which is the rate that the hotel or restaurant is charging for the service they offered

The issue of calculating gratuity at the end of the bill has been an ongoing debate for years. Many businesses will add gratuity directly onto the total amount owed by the customer. But others will not. So why do some businesses do this? And which businesses actually do it?

The tip amount may be figured in two ways: As a percent of the entire tab or, alternatively, by expressing the gratuity tax

How to calculate gratuity on tax?

Restaurant employees must pay a tax for the service they are providing. When you buy something in a restaurant, there is a charge called Gratuity and it is added to the bill. So, the total bill will be with the charge of gratuity.

Most restaurants will charge a standard gratuity for their staff. If you are working in a restaurant for the first time then it will be difficult to calculate the gratuity because the restaurant will have a list of the charges.

If you are a customer and you want to calculate the gratuity then you need to ask for the exact amount. Some restaurants will provide you the standard gratuity and others will charge a fixed amount for your service.

Standard gratuity:

It is an easy way to calculate the gratuity because it is not charged on the basis of your order. The standard gratuity is always fixed and will be charged on the basis of the service provided.

Usually, the standard gratuity is charged on the basis of the service, but it is not fixed.

For example, if you are ordering pizza then you will have to pay the gratuity of 15 percent on your bill.

Here are the basic tips to calculate the gratuity on the basis of your order: