Tipping on tax

Some people don’t tip on the total bill, but go through the gymnastics of removing the tax first (“I’m not tipping on the tax!”)

Let’s check the math.

Let’s assume the taxable item in question is $100 before taxes (this just makes the calculations easier for the cheapskates).

On $100;

GST at 5% is five dollars

PST at 7% is seven dollars

(total tax rate is 12% and amount is $12)

Therefore total tax for our item is $12 on $100 (which incidentally is the same as a 12% tip)

Calculation “A” – tip on pre-tax amount:

Item + tax + 15% tip on non tax amount

(in this example, 15% tip on $100 is $15)

$100 + $12 + $15 = $127

Net amount with tip is $127

Calculation “B” – tip on amount after taxes:

Item + tax

$100 + $12 = $112

15% tip on $112 is $16.80

Item + tax + 15% on net amount

$100 + $12 + $16.80 = $128.80

Net amount with tip is $128.80

(or the equivalent of (just less than) a 17% tip on $100 before taxes. One could just argue they are giving 17% instead of 15%).

Tip difference is $1.80, less than $2 per $100

 

Seriously, people bitch about less than 2%? Less than $2 per $100 or less than $1 per $50. How many years did you work in the retail and service industries? How did you like the “enormous” paycheque? A couple of bucks here and there can make quite a difference to lower income earners.

 

Years ago (before bills were easily separated out between parties) there were several times I went to group dinners and at the end of the meal people brought out calculators as quickly as their cash or payment card at a restaurant. I never went to dinner with those people again.