Tip payouts to installers — taxes and 1099 vs W-2

Tips on premium wrap, ceramic, and detail work can add up. Here's what SalesThumb actually does with them and what's still on you.

What customers tip

Tipping norms vary a lot by service and market — track your own in Reports → Tips Report.

How SalesThumb captures tips

There are three places a customer can add a tip, all live by default (the percentage buttons can be changed at Settings → Payments → Tip options):

• Invoice → Collect payment — when staff collect a card payment on an invoice, the payment dialog shows a None / 15% / 18% / 20% / Other row before the charge. (Note: Quick Sale is a separate flow with its own free-text dollar tip field — it doesn't use this preset row.)
• Customer portal invoice — when a customer pays their invoice from their phone, the same None / 15% / 18% / 20% / Other row appears, labeled "the whole tip goes to your tech."
• "Leave a tip" on the photo gallery link — customers can send a standalone tip straight to the tech from the public photo-gallery/reschedule page for the appointment, separate from paying the invoice. This surface uses flat dollar presets — $5 / $10 / $20 / $50 — plus a custom amount, not percentages.

Each of these creates a tip entry tied to the technician on the job — the full amount, no splitting or routing rules. If you want to pool tips across a crew instead of crediting the named installer, that has to happen outside SalesThumb today; there's no pool/share-rules or distribution-model setting.

Where to track and pay out tips

• Reports → Tips Report shows tips collected per installer for the date range, broken into paid-out vs. not-yet-paid-out. There's no CSV export directly on this report.
• Reports → Payroll Summary rolls tips into each employee's pay for the period (Hours, Commission, Tips, Est. Pay) and has a CSV export button — this is the report to hand off for payroll.

SalesThumb reads out per-tech attributable revenue and commission for a pay period; it doesn't run payroll or move money to staff. You still cut the check or run it through your payroll provider — SalesThumb's job is giving you the accurate numbers to feed in, not auto-syncing to Gusto, Rippling, ADP, or similar. There's no built-in payroll-provider connection today.

Tax treatment

This is where shops mess up.

For W-2 employees

• Tips are taxable wages
• Must be reported as wages on the employee's W-2
• Subject to FICA, FUTA, and federal/state withholding
• Employer pays the employer-side FICA on the tipped amount

For 1099 contractors

• Tips paid through your shop should be reported on the contractor's 1099-NEC
• No employer-side FICA (contractor pays self-employment tax)
• Document the payment as part of their non-employee compensation

For cash tips received directly by employees

• Employees should report cash tips to you monthly (IRS Form 4070)
• Add to W-2 wages
• Many shops ignore this. They shouldn't.

Talk to a CPA. The IRS pays particular attention to tip reporting in service industries — SalesThumb doesn't file anything on your behalf here.

Common mistakes

• Not reporting tips as wages — IRS audit risk
• Letting tips sit unpaid for months — check the Tips Report's unpaid column regularly so nothing lingers
• Hidden cash tips — never sustainable; staff resent it; tax exposure
• No documented policy for split jobs — since SalesThumb credits the single installer on the appointment, decide up front (in writing) how multi-tech jobs share a tip, since the software won't split it for you

Have a written tip policy. Share it. Stick to it.

Related

• Tip collection on invoices
• Tax write-offs shop owners