Tipping etiquette can be tricky, especially when it comes to vendors who own their own business. Should you tip the florist who owns the flower shop? What about the bakery owner who makes your wedding cake? There aren’t always hard and fast rules, but here are some tips on when and how much to tip vendors who own their own businesses.
The Difference Between Employees and Business Owners
First, it’s important to understand the difference between tipping an employee of a business and tipping the owner of a business. Employees like waiters, hair stylists, and taxi drivers rely heavily on tips as part of their regular income and compensation. They are usually paid sub-minimum wage with the expectation that tips will bump their earnings up to at least the regular minimum wage. So it’s standard practice to tip employees 15-20% for good service.
On the other hand, owners and operators of businesses set their own prices and earn income from all sales and services, not just tips. The prices they charge should fully account for their labor, overhead costs, and desired profit margin. As business owners, their income isn’t as dependent on tips as an employee’s income is.
When to Tip Vendors Who Own Their Own Business
Okay, so when should you tip vendors who own their own business? Here are some general guidelines:
- Tip for exceptional service – If the business owner goes above and beyond in terms of service, friendliness, helpfulness, or quality, a tip is a great way to show your appreciation and acknowledge their efforts.
- Tip for custom or specialty services – Sometimes you ask a vendor to provide a custom product or specialty service outside their usual offerings. Tipping is a nice way to thank them for the extra work.
- Tip when you have a long-standing business relationship – If you are a regular repeat customer, have worked with them extensively, or they’ve done work for your family over many years, a tip shows your gratitude for their loyal service.
- Tip at your own discretion – There’s no obligation to tip a business owner. But if you want to, a tip is a gracious extra show of thanks when you feel they’ve earned it through great service.
When Not to Tip Vendors Who Own Their Own Business
On the flip side, there are some cases when tipping a vendor who owns their own business is not necessarily expected or required:
- One-time transaction – For a single, straightforward transaction, tipping is not usually expected.
- Tip already included – Some service providers like hair salons build the tip into their pricing, so an additional tip would be doubling up.
- Formal bidding process – If you solicited bids and negotiated pricing through a formal process, a tip would not be expected on top of the agreed-upon price.
- Home or repair services – Service providers like plumbers, electricians, and lawn care don’t usually receive tips for standard service calls and repairs.
How Much to Tip Vendors Who Own Their Own Business
If you do decide to tip a business owner, how much should you tip? Here are some general tips on tip amounts:
| Service | Suggested Tip Amount |
|---|---|
| Food & drink vendors like caterers or personal chefs | 10-20% of the total bill |
| Spa and salon services like massages | $10-20 per service |
| Custom cakes or specialty bakery items | 10-20% of the price |
| Floral arrangements | $5-10 per arrangement |
| DJ services | $50-100 |
| Photography | $50-100 |
Keep in mind these are just general guidelines – feel free to tip more for outstanding service or less for simple transactions.
Cash Tips vs Tips Included in Payment
Should you tip in cash or add the tip when making your payment? Here are some things to consider:
- Cash tips are more discreet and go straight to the business owner.
- Adding a tip to your credit card payment ensures the tip is declared and taxed appropriately.
- Some customers prefer the convenience of adding the tip to their total bill payment.
- Cash tips can be problematic for some businesses that prefer electronic payment.
- Make sure cash tips align with the vendor’s stated tipping policy.
Examples of Tipping Vendors Who Own Their Own Business
Wedding Vendors
Weddings involve many specially hired vendors. Here are some tips on what to tip wedding pros who own their own businesses:
| Wedding Vendor | Tipping Info |
|---|---|
| Caterer | Tip 15-20% of the food and beverage total. |
| Baker | Tip 10-20% of the wedding cake price, especially if they assembled it on site. |
| Florist | Tip 10-15% of the floral bill. |
| Hairstylist and makeup artist | Tip 15-20% of the service cost. |
| Photographer | Tip $50-200. |
| DJ or band | Tip $100-200. |
| Limo or transportation service | Tip 15-20% of the bill. |
Home Service Vendors
For vendors providing home services, tipping varies. Here are some common examples:
| Home Service Pro | Tipping Info |
|---|---|
| House cleaner | Tip $20-50 per service. |
| Handyman | Tip 10-20% of the bill, especially if they went above and beyond. |
| Gardener or landscaper | Tip $20-50. |
| Plumber | No tip expected for routine service. |
| Electrician | No tip expected for routine service. |
| Painter | No tip expected unless they went beyond scope of work. |
Should You Tip a Business Owner for Poor or Mediocre Service?
What if you receive poor or mediocre service from a vendor who owns their own business? Here are some things to consider:
- No, you are not obligated to tip for unsatisfactory service.
- A reduced tip can send the message you were disappointed with the quality or service.
- Providing constructive feedback is better than no tip at all.
- Keep in mind one bad experience may not represent their normal service.
- If it’s very poor service, consider not using that vendor again.
- If problems are fixed, tipping afterward shows appreciation for making it right.
Use your best judgment based on the situation. While you don’t have to tip for unsatisfactory service, remember the business owner isn’t relying on your tip as their sole income. Expressing feedback directly may be more constructive.
Are Tips for Business Owners Taxable Income?
Yes, tips that vendors receive as business owners are considered taxable income. This includes cash tips and tips added to credit card payments. Even if tips seem discretionary, they must legally be reported as income on taxes.
Some key facts about tip taxes for business owners:
- Business owners must report all tips as part of their gross revenue for income taxes.
- Tips are subject to the same income tax rate as their regular business revenue.
- Unreported cash tips are considered tax evasion, with penalties if audited.
- Sales tax may also apply for tip amounts on top of existing sales tax.
- Tip reporting ensures all income is taxed appropriately as required by law.
So while tips seem voluntary or extra, vendors still have tax obligations for tip income. Make sure your tips are included on your receipt and avoid paying cash tips under the table.
Should You Tell Customers You Don’t Expect Tips?
Some business owners don’t really want or expect tips from their customers. This might include photographers, contractors, lawyers, accountants, and other specialized service providers. Should you proactively tell customers you don’t expect tips?
Here are some pros and cons to consider:
| Pros | Cons |
|---|---|
| Lets customers know tipping is not required or expected | Could result in getting fewer tips from those inclined to tip |
| Avoids awkward situations or confusion over tipping | Some customers may tip anyway and prefer to make that decision themselves |
| Keeps pricing transparent with no hidden tip expectations | Makes it difficult to accept tips from appreciative customers who want to reward great service |
There are good arguments on both sides. Some business owners state their tipping policy on their website or invoice. Others address it if a customer asks. There is no one right or wrong approach, as long as you clearly communicate to avoid confusion.
Should Tipping Culture Change to Provide Living Wages?
The broader issue around tipping is whether the practice needs reform. Some argue that tips should be reduced or eliminated, with service workers paid a full living wage instead. Here are some perspectives on both sides of the debate:
Arguments for Tipping Reform
- Tips are an unreliable source of income and shouldn’t make up the bulk of workers’ pay.
- The current tipping system leads to inconsistent wages and income inequality.
- Employers should pay fair wages so workers don’t have to rely on tips.
- Customers shouldn’t need to supplement wages – fair pay should be baked into business models and pricing.
- Higher base pay would provide economic security for more service industry workers.
Arguments Against Tipping Reform
- Tips incentivize good service and allow customers to reward workers directly.
- Higher pay without tipping could cause restaurants and services to raise prices substantially.
- Eliminating tipping removes workers’ ability to earn substantially more through good service.
- Many service workers prefer tipping culture and credit it for higher overall earnings.
- Changing the system brings uncertainty on how new models would impact jobs and prices.
There are good points on both sides. While the larger tipping debate continues, individual customers can make tipping decisions that align with their values and appreciation for service.
Conclusion
Tipping a vendor or service provider who owns their own business is not always expected, but can be a nice way to show your gratitude and appreciation. While tips aren’t as essential for a business owner as for an employee, they are still a welcome token of thanks for providing great service. Consider the type of service, extent of customization, your relationship history, and the quality of service when deciding whether or not to offer a tip. Aim for tipping in the 10-20% range when you do tip a business owner – and make sure tips are declared on your receipt for proper tax reporting.