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Inspired by this question, I started wondering about how voluntary tips are taxed when they aren't on a service, but on goods.

For example, here's an interesting one. There's a legit company called EmeTerm (https://www.emeterm.com). They sell medical electronics devices online and allow customers to add a voluntary tip to their purchases. How are those tips classified for tax purposes?

Would this be classified as general revenue, or classified differently?

Interested in answers for all jurisdictions (just using EmeTerm as an example).

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    Who does the tip go to? Why would anyone pay this tip?
    – Barmar
    Commented Aug 20 at 19:08
  • @Barmar Good questions, and I pondered the answers myself. I do not know what the answer to your first question may be. As to your second question, I think it's an appeal to people who appreciate the products so much that they want to leave a tip. I find it a bit odd for such a company to be asking for tips, but it gives people another mechanism to express their appreciation, so that seems good. On the other hand, the tip is paid when someone places their order, not after they receive and use the product(s), so that seems backwards to me.
    – Amazon Dies In Darkness
    Commented Aug 21 at 6:15
  • Indeed, when I began making use of delivery services during the pandemic, I started giving very generous tips to support these "essential workers" who I assumed made very little in wages from the services. But I still have a hard time imagining giving a bonus to the services themselves (from what I heard, GrubHub, DoorDash, and UberEats were charging huge fees from the restaurants). But I guess it can't hurt to ask -- the worst that can happen is no one pays.
    – Barmar
    Commented Aug 21 at 18:52

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All gratuities are treated the same

They are assessable income in the hands of the person who benefits from them. So, if the supplier keeps them, they pay tax on them. If they are passed onto an employee, the employee pays tax on them; the employer has an equal amount of income and deductible expenses, so they pay no tax.

They are not consideration for the supply of the goods or services so they are not subject to Goods and Services Tax.

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