Apply Auto Gratuity with Square for Restaurants
Note: Automatic gratuity may be considered taxable. For specific tax questions related to your business, be sure to consult with a tax professional.
With Square for Restaurants Plus, you can enable a fixed percentage or a manual amount of auto gratuity applied to bills manually, automatically, or based on party size. The auto gratuity is usually a set percentage of the pre-tax total, and it goes directly to the staff.
I’s important to remember that auto-gratuity is not a tip. Tips are voluntary, and diners are free to leave any amount they feel is appropriate. The auto gratuity is a service fee that businesses are legally allowed to assess, and it goes directly to staff.
Note: Applying auto gratuity to all bills will only apply to Square for Restaurants Point of Sale version 5.35 and higher. Be sure to update your Square for Restaurants POS.
Enable Auto Gratuity
Go to Device management > Service settings > Automatic Gratuity on your online Square Dashboard.
Toggle on Allow Automatic Gratuity.
Enter the gratuity amount and configure other gratuity settings.
|Manual Auto Gratuity
|Can be percentage based or a fixed amount. Auto gratuity is created in your Square Dashboard and applied on the POS. For example, if a delivery fee is always 3%, that percentage would be set as manual auto gratuity added to the check.
|Variable Auto Gratuity
Exact amount is decided at checkout. Once auto gratuity is added
to the bill, you can select the value or percentage used for this particular fee.
|The amount of auto gratuity is not impacted by any tax rates.
|The auto gratuity is taxable, and the entire auto gratuity will be taxed at the assigned rate.
|Auto gratuity inherits the tax rate from the items in the cart. If there are two items in the cart and one has a tax rate of 0% and the other has a tax rate of 4%, the auto gratuity will be taxed in proportion to the value of the two items and their respective tax rates.
Important Notes About Surcharges
If you surcharge at your business, here are a few things to keep in mind:
Merchants in Australia are responsible for adhering to all regulations regarding imposing a surcharge on consumers when a card is used for payment. New regulations set out by the ACCC have banned businesses from applying excessive surcharges for accepting different payment types.
Surcharging is allowed, but must not be excessive.
Service or handling fees are not a workaround.
A business is not able to bypass the new ban by instead charging a “service” or “handling” fee on some card payments. This is still effectively applying a surcharge.
The ban does not prevent you from changing your prices.
When deciding on the prices for your products and services, consider all of your operational costs and ensure you have a sustainable profit margin. Just like any business expense (including rent, storage or staff costs), payment processing fees should be taken into account when determining the best pricing model for your business.
Square processing fees is taken out of the total amount of the transaction, including tax, tips, and any added auto gratuity.
To view and export a report of transactions when auto gratuity is applied:
Go to Reporting > Reports on your online Square Dashboard.
Click Auto Gratuity.
Select your date range.
Disclaimer: Please note that this guidance is general in nature and does not constitute legal, tax or any other type of professional advice. If you are unsure about your tax obligations or where to find the relevant information, we suggest you consult with a professional.