Tipping on takeout and online orders: a guide for US and Canadian restaurant owners

Customers in the US and Canada often add a tip to online pickup and delivery orders, but no law requires them to, and no law stops you from asking. If you add a tip prompt to your own ordering page, make it a real choice with "No tip" available, pass every card tip on to the staff who earned it, and keep tips separate from any mandatory service charge. A tip the customer freely chooses generally isn't subject to sales tax in US states or to GST/HST in Canada. A charge you add to the bill often is.

This is general information, not legal or tax advice. Tip and wage rules also vary by state and province, so check yours.

How tipping works on pickup and delivery orders

Whatever you choose, write it down and tell staff. Customers increasingly ask where the tip goes, and a one-line note on your ordering page ("Tips are shared by the whole kitchen and counter team") answers it.

Choosing your tip presets

• Always include "No tip". The IRS says a payment screen that forces a tip above zero makes it a service charge, not a tip.
• Don't pre-select a percentage. Let the customer choose.
• Offer three or four percentages plus a custom amount. Pickup customers often expect lower percentages than table service; set what fits your restaurant.
• Base the percentage on the food, not on tax, delivery or packaging fees.
• Show the tip as its own line on the bill and receipt, so staff, customers and your bookkeeper can all see it.
• Say where tips go, especially on delivery orders you don't deliver yourself.

Worked example: a $40 delivery order

A customer orders $40.00 of food for delivery by your own driver. Say your sales tax is 8% and your delivery fee is $4.00.

• The tip is worked out on the $40.00 food, not on the $47.20 of food, tax and delivery. 15% of the full $47.20 would be $7.08 and would look like a tip on your tax.
• The $6.00 tip carries no sales tax: it's the customer's free choice.
• Whether your state taxes the delivery fee is a separate question; ask your accountant.
• If the customer had picked "No tip", the total would be $47.20.

US rules on tips (federal)

The Fair Labor Standards Act (FLSA) sets the federal floor. States can add stricter rules.

• Tips belong to employees. An employer may not keep employees' tips for any purpose, whether or not it takes a tip credit (29 CFR 531.50).
• Managers and supervisors can't keep other employees' tips, from a pool or a tip jar. They can keep tips for service they directly and solely provide. An owner with at least a 20% stake who actively manages the business counts as a manager for this rule (DOL Fact Sheet #15B).
• Tip pools are allowed. If you take a tip credit, the pool can include only employees who customarily and regularly receive tips. If you pay everyone at least the full minimum wage in cash, the pool can include back-of-house staff such as cooks and dishwashers (29 CFR 531.54).
• Pay pooled tips by the regular payday (29 CFR 531.54).
• Tip credit: the federal cash wage can be as low as $2.13 an hour, with a maximum tip credit of $5.12 an hour, but tips must make up the rest of the $7.25 minimum wage (DOL Fact Sheet #15).
• Card fees: under federal law you may reduce a card tip by the card company's fee on it, and no more, and still pay the tip by the regular payday. Some states ban this deduction (DOL Fact Sheet #15).
• A compulsory service charge is not a tip, even if you pass it to staff. It's part of your gross receipts and can count as wages (29 CFR 531.55).

Many states set their own tip-pool and tip-credit rules, and some don't allow a tip credit at all. Check your state labor department before you set up a pool.

Sales tax on tips: three state examples

The pattern holds in many states: a tip the customer chooses isn't taxed as a sale, and an amount the restaurant adds often is. Check your own state's rules.

"No tax on tips" is about workers' income tax

The 2025 federal law created an income tax deduction for workers on qualified tips, up to $25,000 a year for 2025 to 2028, phasing out above $150,000 of income ($300,000 for joint filers). Qualified tips must be voluntary: the IRS says an automatic charge, such as 18% on large parties, is a service charge. The deduction doesn't change your payroll tax withholding on tips, and it isn't a sales tax rule.

Canada: GST/HST and provincial rules

GST/HST. The CRA says a tip a customer freely gives isn't subject to GST/HST, but a mandatory or suggested amount the business adds to the bill as a service charge is. A tip prompt that starts at "No tip" and lets the customer choose keeps the decision with the customer; if you add any amount to the bill yourself, charge GST/HST on it. For payroll, tips you control (collected by card and paid out by you) need income tax, CPP and EI withheld; tips paid straight to the employee don't.

Tips don't count toward minimum wage in Ontario, BC, Quebec or Alberta: pay at least the minimum wage on top.

How to take tips on your Menuthere ordering page

Tips are off until you switch them on, and they're on every plan, including Free.

1. Go to Settings → Payments & tax and open Tips & service charge.
2. Switch on Let customers add a tip.
3. In Tip percentages, type up to four percentages, separated by commas. They start as 10, 15 and 20.
4. Under Offer tips on, pick the order types: Dine-in, Takeaway (takeout) and Delivery. All three are picked at first. Press Save.

What customers see. At checkout: Add a tip, with No tip, your percentages and Custom. No tip is selected until the customer chooses, so nobody tips by accident. A percentage tip is worked out on the food after money-off discounts, like the example above, and a custom tip can be any amount up to the food total. Tips are never taxed.

What you see. The tip is its own line on the checkout bill, the customer's order page, printed bills, your order screen and WhatsApp order messages, and it's part of the order total, so online card payments collect it with the order. If you edit an order's dishes, the tip keeps its amount. Your sales tax shows as Sales tax on US bills and GST on Canadian bills, or any name you type: see Tax: GST and VAT.

Good to know.

• Tips work on Menuthere's standard checkout. Orders you ring up at the counter on the POS don't add them.
• Menuthere also offers an optional percentage service charge, which customers can remove. In the US and Canada an amount you add to the bill can be taxable even when staff get it (see the tables above), so for most takeout and delivery orders a tip prompt is the simpler choice. If you use a service charge, Charge tax on the service charge adds your tax rate to it.
• Splitting the pooled money between staff is still your job. Our tip split calculator works out shares by hours or points (it's built for UK tronc, but the maths is the same).
• Full details: Tips and service charge.

Taking orders on your own page also means 0% commission: compare what the apps charge in the US and Canada, including Uber Eats and SkipTheDishes.

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