Customize Service Charges and Mandatory Gratuity
Last updated: Jan 29, 2026, 2:55 PM
Learn how to add a service charge to a guest's check for things like large party gratuities, event fees, special menu upsell charges, and more.
| If you're attempting to use the service charge feature to assess credit card surcharges, you bear a risk of non-compliance. You shouldn't use the service charge feature to apply credit card surcharges. Non-compliance may result in card network fines or other liabilities under state law for which the customer is responsible.
Toast Credit Card Surcharging is the only way to apply credit card surcharges on the platform today in a manner that complies with card brand rules*. Please note that not all Toast customers are eligible. You can find more information about eligibility and how it works here: Get Started with Toast Credit Card Surcharging.
* - Toast's Credit Card Surcharging product helps merchants comply with card brand requirements. Merchants remain responsible for compliance with any additional disclosure or other legal requirements that may apply in their state. Not available in CT, ME, MA, OK. Merchants that have a direct Card Acceptance Agreement with American Express are not eligible. |
| Additionally, Toast merchants are solely responsible for compliance with all applicable laws and rules, including those applicable to imposing service charges. When you add a service charge using Toast functionality, during checkout, both you and your customers will see service charges as a line item on the transaction. Some jurisdictions may have additional requirements, such as requiring that any extra fees are included in advertised prices. If your local laws, regulations, or applicable card network rules have additional requirements that prevent your use of Toast’s existing service charge functionality, please remember to keep all of your operational costs in mind when implementing pricing to help promote sustainable margins. If you are unsure about the local laws, regulations, or applicable card network rules applicable to you, please consult an attorney or other professional for advice based on your unique circumstances.
At this time, Toast Credit Card Surcharging is only available to customers based in the U.S. |
Set Up Service Charges and Fees
A service charge is an additional fee that is collected in exchange for a product or service on top of the cost of the goods. Restaurant owners may choose to add a service charge to a bill for various reasons, including:
- Large dining party fee (mandatory gratuity for parties with more than a specific number of guests)
- Special menu upsell fee
- Banquet event fee
- Cutlery fee
- Hotel room service charge
- Bottle service charge
- Mandated service charge for healthcare
 | Unlike an optional tip, service charges are a required payment as part of a guest’s bill and do not always go to the employee who serves a guest. An important thing to note about a service charge is that they go directly to the restaurant or business to keep or allocate as they see fit. If you configure a service charge to go to an employee, the service charge is considered part of the employee’s non-tip wages. See for more details. |
This article will reference two service charge terms that are separate and distinct in Toast:
- Employer-kept service charges: If a service charge is kept by the restaurant, it isn't considered income for an employee and is considered part of net sales for an employer.
- Mandatory gratuity: If a service charge or part of a service charge is given to employees, it is referred to in Toast as a mandatory gratuity. This is different from a tip and is considered non-tip income for the employee. The most common example is automatic mandatory gratuity.
In any case, follow the steps written below or presented in our video tutorial to add service charges.
Step-by-Step Guide: Service Charges
Follow these steps to create service charges in Toast Web.
- Log in to and navigate to Payments > Checks & receipts setup > Service charges.
- Select + Add to create a new service charge.
- Configure these options on your screen:
- Name: Name of the service charge as it will appear on the POS and receipt, if applicable.
- Charge Type: Fixed Percent, Fixed Amount (dollar), or Open Amount (user enters dollar amount each time this service charge is applied) Note: Open Amount cannot be used if the service charge is for Takeout or Delivery.
- Charge Percent/Amount: How much will be charged. Its configuration depends on the Charge Type.
- Apply After Amount Threshold: Setting this to $0.01 or more will automatically apply this service charge to any order, regardless of dining option. Setting this amount to a higher value will automatically apply the charge to orders of a greater or equal pre-discount amount.
- Assign to check owner (Gratuity?):
- If you select Yes, this service charge will be configured as gratuity and will be paid out to the check owner (mandatory gratuity). When a service charge is assigned to the check owner like this, the digital receipt tip prompt will always show 3%, 5%, and 7% as the tip options.
- If you select No, this service charge will be included in net sales for the business (employer-kept service charge). Suggested tips will be calculated on the pre-service charge total.
- This setting will have an impact on how these charges appear in your general ledger (GL) accounts and codes, if applicable.
- Note: If Assign to check owner (Gratuity) is set to Yes, the amount will appear in Fees and charges at the bottom of your guest receipt. If it is set to No then the guest receipt will show the name of the service charge.
- Taxed?: Selecting Yes here will include the service charge in the taxable amount of the check. Selecting No will keep the service charge from having tax applied. Note: If your tip settings in UI options are configured to calculate tip after tax, this will also apply to the tax configuration for non-gratuity percentage service charges. Please consult your tax advisor for guidance on your applicable tax obligations. Compliance with applicable tax laws is your responsibility.
