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Bill Radke: You might be paying more attention to small financial matters
these days, like gratuities. Here with a tip about modern tipping is our regular Wednesday guest, Los Angeles Times business columnist David Lazarus. Good morning.

David Lazarus: Good morning.

Radke: So David, because of the recession, I assume restaurants are suggesting you leave a smaller gratuity than you used to?

Lazarus: Oh contraire! You assume wrong my friend!

Radke: Oh?

Lazarus: As a matter of fact, I was talking to a guy the other day who went into a restaurant here in Southern California who paid with his credit card, got the receipt, and like so many receipts these days, it included suggested gratuities on it of 15 percent, 18 percent and 20 percent. But he realized, wait a minute, these aren’t the pre-tax amounts that I had calculated prior to getting the receipt — these were all after-tax amounts.

Radke: So what is the rule of thumb today?

Lazarus: Well that’s a good question, and that’s something I was curious about myself. Emily Post, for example, says you tip on the pre-tax amount. And there was a conversation online the Zagat site, for example, where they all agreed pre-tax is right unless you’re just overjoyed with the service, and then you might do the after-tax amount. And yet also the participants in the Zagat survey observed that any time you get suggested gratuities on your receipt, it is almost always the after-tax amount. So why is that?

Radke: Yeah who writes those suggestions? The restaurants?

Lazarus: Well, is it the server, is it the restaurant, is it the credit card company? I talked to Mastercard, they said oh don’t blame us, it’s not us setting that. I called up the restaurant of the guy who I wrote about originally in this piece, adn they said, “Are you kidding? We didn’t know this.” And in fact, the restaurant owner even told me “When I go to other restaurants, I always tip on the pre-tax amount.” So who’s to blame? Apparently it’s the processing companies. That’s not Visa and Mastercard, those are the guys who provide the machine that sits next to the cash register that is going to be processing the transaction. They have software that will include these suggested gratuities on it. Now the real question now is, are they doing this by default, or are they doing this in cahoots with the establishment? I’m having a hard time nailing that down, but the bottom line is almost uniformly, when you get suggested gratuities on your receipt, it is for the after-tax amount.

Radke: Los Angeles Times business columnist David Lazarus. Just accept my gratitude. Be happy with that.

Lazarus: Always! Hahaha.

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