How Square and other payment apps are pushing a contentious strategy to consumers

Here’s a tip for restaurant guests.

As more restaurants use digital payment methods that offer free choice tips, the debate is rising about whether those tips should be counted before tax or after tax.

The issue of tipping and etiquette has long been a cultural debate, but the discussion gained attention recently in the wake of the Dave & Buster’s scandal, where customers accused the restaurant of secretly running a “scam” by tipping up 20%.

Customers have shared that tip offers differ depending on whether they paid with a paper receipt or a digital payment platform, and the inconsistency has left people wondering how the tip amount is calculated — and whether the system is intentionally increasing free cash.

Some have suggested that this discrepancy may be due to tax calculations. It turned out that the digital receipt offered a recommended offer based on the after-tax price, while the paper receipt offered an offer based on the pre-tax amount.

The post reached out to major digital payment platforms such as Square, Toast, Stripe, Revel, Upserve and Clover for feedback.

However, both options can help restaurants raise prices without customers noticing.

When you set up tipping on Square, for example, the account owner is asked to enter tip numbers and choose whether they’d like it to be added before or after the tax is applied to the sale.

Digital platform Toast also allows the restaurant to see if the percentage of tips should be calculated before or after tax, and the proposed amount that guests will see, according to their website.

Additionally, the default setting in Toast for point calculations is to calculate points before tax is added to the check, so restaurants will have to change that manually.

Converting tip numbers into up-to-date tax liabilities and online charges that make digital payment options count as opposed to a paper receipt.

When you look at Square’s step-by-step guide for business owners, they can choose from a variety of options when setting up.

With the automatic Smart Tip Amounts option, if the transaction is less than $10, the available tip options are No Tip, $1, $2 or $3. For sales of $10 or more, the available tipping options are No Tip, 15%, 20% or 25%.

Set Fee Percentages allow owners to enter three common percentage options, as well as an option to allow customers to enter an amount of their choice.

There is also a Beta option where owners can choose to ask for tips before payment is made.

Additionally, Square has something called “round-up tipping”, which will automatically appear based on the size of the transaction. If the total trade is less than $20, the point will round up to the next $1. If it exceeds $20, it will round that amount up to the next $5.

So while Square’s process is automated, the restaurant has control over how much it chooses to collect.

Account owners or team members with assets and asset permissions also set unit prices themselves in the Square dashboard.

They can import items in bulk, often adding to a list or original list, as well as updating and modifying individual items.

As consumers are aware of the huge differences in their bills these days, it would be useful to check the bill provided on the digital payment platform and compare it with the prices of the opportunities.

Outside of Square and Toast, other popular payment platforms handle delivery differently.

Stripe allows restaurants to choose which tips appear when you shop — the platform displays the options the business chooses instead of automatically calculating or raising tip amounts.

Revel and Upserve both let restaurants customize the options customers see — including which tips are presented — and other platforms like Toast also let businesses choose whether tips are calculated before or after tax.

Clover allows restaurants to allow or decline digital tips and choose what percentages appear, but its documentation doesn’t clearly show the change for pre-tax figures — it calculates tips for a small amount of tipping (including tax) by default.

In short, it’s not the platforms that build your tips privately – it’s the businesses themselves that make the decisions.

Customers who see the differences between digital and paper receipts are often only seeing the result of different settings or rules that run in each system.

For example, Square’s round-up feature may push tips slightly higher based on total sales, while Toast defaults to pre-tax numbers unless the restaurant changes.

What’s for dinner? If your tip is not visible, check the receipt carefully.

The digital system makes it easier to deliver, but it can also make it easier for small inconsistencies to appear – and then customers notice.

As restaurants increasingly rely on technology for payments, the debate over whether to tip before or after tax isn’t likely to go away anytime soon.