How to Calculate and Split Restaurant Tax and Tips

Splitting the food is the easy part. The trouble starts at the bottom of the receipt: tax, maybe VAT, maybe a service charge, and then the tip. Who pays how much of each?

This guide explains what each of those lines means, how they're usually calculated, and how to share them fairly, with worked examples for the most common kinds of receipt.

The lines at the bottom of the receipt

Sales tax (added to the bill)

In places that use sales tax, menu prices are shown before tax, and the tax is added at the end as a percentage of the subtotal. On the receipt you'll see a subtotal, a tax line, and a higher total.

VAT (often already included)

In many countries menu prices include VAT. The receipt may still show a VAT line, but only to tell you how much of the total was tax. It is not an extra amount to pay. The clue is that the VAT line isn't added on top: the total already equals the sum of the items.

Service charge

Some restaurants add a fixed percentage to the bill as a service charge, sometimes before tax is applied and sometimes after. It's part of the bill, so it's split like tax. If a service charge has already been added, the group may decide it doesn't need to add a separate tip as well. Check the receipt before tipping on top.

Tip

A tip is the amount the group chooses to leave for service, on top of the bill. Customs vary a lot by country. Where tipping is expected, it's commonly calculated as a percentage of the pre-tax subtotal. Whatever amount you choose, the splitting method below is the same.

The rule for splitting tax, service and tip

Tax, service charge and tip are all calculated from the food. So the fair way to share them is to follow the food:

Your share = (your food total ÷ everyone's food total) × the tax, service or tip amount

Someone who ordered 40% of the food pays 40% of the tax and 40% of the tip. With an equal split everyone ordered "the same" by definition, so everyone pays the same share.

Example 1: sales tax and a tip added at the end

Two people. A's dishes cost $50 and B's cost $30, a subtotal of $80. Tax is 8% ($6.40) and they tip 20% of the subtotal ($16.00). Total: $102.40.

A ordered $50 of $80, which is 62.5%. B ordered 37.5%.

An equal split would be $51.20 each, which means B pays $12.80 towards A's meal.

Example 2: service charge, then tax on top

Some receipts add a service charge first and then calculate tax on the food plus service. Here's a dinner for three in a currency with three decimal places (like the Jordanian dinar), with a 10% service charge and 16% tax:

Because service and tax both come from the food, you can use one multiplier: 51.040 ÷ 40.000 = 1.276. The three friends ordered 18.000, 12.000 and 10.000:

Note the three decimals. If your currency uses them, round to three places, not two, or the shares won't add up.

Example 3: VAT already included

A receipt shows three dishes at 12.00, 15.00 and 18.00, then "Total 45.00", then "of which VAT 7.50". The VAT is inside the 45.00. Each person pays the price of their dish: 12.00, 15.00 and 18.00. Adding the 7.50 again would mean paying 52.50 for a 45.00 bill. This is one of the most common bill-splitting mistakes.

Should you tip on the pre-tax or post-tax amount?

Both are common; tipping on the pre-tax subtotal is the usual guidance where tipping is customary. On a $150 subtotal with 8% tax, a 20% tip is $30.00 on the pre-tax amount, or $32.40 on the $162 total. Neither is wrong. What matters is that the group agrees on one, and then shares the resulting tip in proportion.

When equal tips make sense

Some groups prefer to split the tip equally even when they itemize the food, on the basis that everyone received the same service. That's a reasonable choice, as long as everyone knows it's being made. Splitting it in proportion simply follows how the tip was calculated.

Discounts and vouchers

A discount is negative tax: share it in proportion too. If a 10% voucher applied only to food and not drinks, share it in proportion to each person's food, so the person who only had drinks doesn't get money off for someone else's meal.