The tip % cannot be charged on the sales tax, but the tip itself is probably considered taxable sales. So, for a 100.00 pre-tax bill with automatic 20% tip and 10% sales tax the correct total would be $100 + 20tip + 12tax = $132. What you describe would be $100 + 10tax + 22tip = $132. If the state does not collect sales tax on mandatory tips, then there would be an overcharge $2.In all likelihood, the wait staff gets the whole $22 and the state gets only $10 in any of these cases. I believe in the tipping system. I even agree with automatic tips for large parties (6 or more). But there is no reason for that mandatory tip to exceed 15% EVER! One can always leave more, if called for. The reason for making it mandatory is to avoid someone stiffing a server unfairly, costing that server a huge portion of their shift income. Many problems arise in serving a larger party, compared to normal tables simply because of the number of diners, and if the service unavoidably suffers it is unfair to deprive the innocent servers of their expected income. That is the only reasonable justification for automatic tips. 15% meets the servers' reasonable expectations, anything more is simple greed.