Restaurant receipts often include the meal, tax, and a tip. In many cases, the tax applies only to the meal and not to the tip. Before publishing to your accounting software, you may need to split these amounts using line items.
This article explains how to separate the meal and tip so that tax is applied correctly.
Before you start
Make sure the item has been uploaded and is visible in your Costs inbox.
For best results when submitting:
Capture the itemised receipt showing the meal and tax
Capture the card slip showing the tip
Upload both in a single image if possible
This helps Dext extract the total amount and the tax correctly.
Why you need to split meal and tip
Dext extracts the total tax amount from the receipt. However, tips are usually not taxable.
If the tip is included in the total, you must split the item so:
The meal uses the correct tax rate
The tip uses a 0% or exempt tax rate
This ensures the correct tax amount is sent to your accounting software.
Step 1: Open the item and create line items
To split the meal and tip:
Open the item from the Costs inbox.
On the Item details page, select Create line items.
Select + Add new line item twice to create two separate lines.
You will now split the document into a meal line and a tip line.
Step 2: Configure the meal line
For the first line (the meal):
Enter the meal amount
Select Extracted amount from the Tax dropdown
Confirm the extracted tax matches the receipt
This ensures the correct tax amount is applied to the meal.
Step 3: Configure the tip line
For the second line (the tip):
Enter the tip amount
Select a 0% tax rate or exempt tax rate from the Tax dropdown
Tips are typically not taxable, so they should not use the extracted tax rate.
Step 4: Confirm totals and publish
Before publishing:
Make sure the total of the line items matches the total shown in the Item column
Confirm the tax amount reflects only the meal
Select Done, then publish the item as normal.
The correct tax amount will be sent to your accounting software.
Important: Canadian customers using QuickBooks Online
In Canada, meal, beverage, and entertainment expenses are generally limited to 50% of the amount incurred for income tax purposes. Taxes and tips are included in this total.
If you use QuickBooks Online in Canada, you may need to:
Create a custom combined tax rate for meals in QuickBooks Online
Apply that custom tax rate to the meal line
Dext does not automatically separate tip amounts from extracted tax. You must use line items to split the meal and tip before publishing.
When to use line items
Use line items when:
A receipt includes both taxable and non-taxable amounts
A tip is included in the total
Different parts of the document require different tax treatment
Line items allow you to apply different tax rates to each portion of the document before publishing.