Shopify adds tipping feature to checkout that can also be used for donations

Shopify has added a new feature to its checkout that lets store owners collect tips or other extra contributions from customers.

The “tipping option” is in addition to the existing tip feature in the Shopify POS that is frequently used by service businesses running their business on it.

This feature adds a “tip” option to online orders, including letting customers select from common tip percentages or enter their own amount.

In addition to tipping in the traditional sense for services, delivery or other “voluntary” add ons, the feature can also be used for collecting donations for charity.

Along those lines, the feature also supports adding a custom label to it to help customers better understand what it is for (or translate it into another language).

Using this new feature does require some quick setup steps — even if your business already uses tipping on the POS.

Shopify also notes that tips are calculated on pre-tax totals and before any shipping or delivery charges — but tips are still subject to standard payment processing fees.

Online store tipping for Shopify is fully compatible with Shopify Payments and many other third party gateways, but it does require your payment processor to be able to correctly interpret a separate line item for the tip amount — and Shopify recommends testing the feature in these cases.

Shopify Plus users cannot use the feature if they have customized the checkout.

In addition to the front end experience, Shopify tipping also allows store managers and owners to view reports on the total amount of tips or donations that have been collected to make paying out these amounts easier.

Store owners should keep in mind that, in most jurisdictions, tips are still considered taxable income and may need to be reported on your employee or independent contractor paperwork. Employees whose work falls under minimum hourly wage requirements may also be subject to additional financial record keeping.

In addition, there has been a growing effort to clearly note whether or not delivery fees are paid directly and in full to the delivery person or your businesses keeps them for processing and other expenses — which sometimes encourages shoppers to tip in addition to any delivery fees.

If you’re using the feature for charitable donations, you should also check on how those should be accounted for and if you’re subject to any taxes or other responsibilities by collecting these donations, which may vary based on how the organization is set up. It’s also generally a good idea to check with the charity in question and, of course, make sure the money collected for nonprofits ends up making it there.

Finally, keep in mind that regulations may differ on whether or not you can subtract processing fees from what you pay tip recipients and, if you use pooling for tips, who is eligible to participate and how it is distributed. For example, in some cases managers or owners are not eligible for sharing tips.