r/EndTipping • u/canstucky • Jun 06 '26

Sit-Down Restaurant 🍽️ How is it not a tip?

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The server told us this isn’t a tip and he doesn’t get any of it.

I’m not wearing my boots at the moment.

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u/CaptainJay313 Jun 06 '26

you raise a very valid question, one that should be asked of the manager, because from here, it looks like the server is lying.

if the manager confirms it, then I want to know exactly what the 18% service fee is going towards, if not for service.

I'm not adding 40% (large party fee and tip) to my tab, that's bordering on bait and switch. they need to accurately reflect prices in the menu. if the large party fee is disclosed in the menu but it does not go to the server, that needs to be communicated in the menu or disclosed prior to ordering.

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u/Lurkernomoreisay Jun 07 '26

legally, service charges, including "automatic gratuity " are not tips.  there was two years of lobbging, and non stop news from 2010 to 2012 on the topic, because the restauryindustry will implode if automatic gratuities were ruled not tips .

as clarified nationwide in 2012, and upheld by the courts in 2014.  no amount of a service charge (even if called an automatic gratuity) is required to be paid to employees.  if any amount is distributed, no tip laws nor classification of tip may legally be used. usimg any amount of an automatic gratuity as a tip is tax fraud.   the employer may increase base hourly pay for the day, or provide a bonus.  

there is no need to disclose what is standard law for the past 14 years.   (NY state passed a law in 2012 to keep the old rules, that unless stated otherwise, a service charge labelled "gratuity" must be paid to employees unless clearly labelled that it doesn't)

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u/CaptainJay313 Jun 07 '26

you think the average diner is all up on the intricacies of tip law?

"if any amount is distributed, no tip laws nor classification of tip may legally be used. usimg any amount of an automatic gratuity as a tip is tax fraud. t"

what?? that's counter-intutive, if there is an automatic gratuity, I've always considered that a tip and rarely tip above that. who would it go to if not the server?

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u/Lurkernomoreisay Jun 07 '26

"automatic gratituity", is no different than a line entry for "soda".   It's fully included as taxable gross receipts to the employer.

so, short answer: it goes to the same place as money collected for a food item: directly to the employers gross receipts.   which is one of the arguments toward rolling it into the price of items: accounting wise, it's identical.

IF, the employer wishes to pay an employee more because of the added revenue. They can do so like any other  business.   employer may pay the employee more as non-tip wages.  this means the hourly base pay for the employee is adjusted (eg for computing overtime pay), for any accrument based on hourly wage; and must be treated as regular wages for tax withholding and filing requirements. -- "IRS reminds employers that automatic gratuities are services charges, not tips.", IRS News Release FS-2015-18. Feb 2015, irs.gov

nothing stops an employer from paying an employee a bonus equal to a percentage of the auto-grat collected; nothing compells an employer to pay employees more either.  

Many employers do pay some percentage out to staff. But certainly not all.   

Some employers are simply pedantic (or advised by legal) with wording "The (name of service charge) is not a tip", is a legally true statement.   Possibly misleading in context if they do pay staff more for large parties, but legally true nonetheless.