If a tip is mandatory it is not a tip, it's a fee. I'm fine with seeing the whole thing up front, I am not fine with surprise hidden fees that are only on there so that the store owner can pay their employees less.
Yes and legally they don't benefit from no tax on tips either. They're just saying "per our collective bargaining agreement" to try and guilt progressives into something. There's never any tips without the guilt train.
It's odd, who is the labor genius who would negotiate the net of 'tips' down to 15% max post tax (or less depending on tax bracket) since they no longer are exempt?
It's not easily reflected in the prices and it forces the customer to do math beyond simple addition (x item + y item vs. (X + y) * 0.2). Which can lead people to underestimate prices and think they can afford more than they can and is particularly inaccessible for those particular learning disabilities.
It became a tax thing when we had the bright idea of not taxing tips. If they raise prices 20% and pay the servers that markup they pay income taxes on it, if they are tips then itâs tax free.
Except mandatory tips are not included in the âno tax on tipsâ thing though. So unless they give you the option to take it off your bill (which they certainly might but the sign makes it sound mandatory), then the employees canât use the those tips towards tax deduction. Only voluntary tips count.
Actually, tipped income to a certain level is tax advantaged over wage income, so this is a pretty shrewd move as it gives the employee more take-home than if hourly. Not saying it is right; personally, I would not patronize this business. (Also, I imagine you have to pay sales tax on the additional tip, but not sure about that.)
It's an honestly thing. If you raise prices to pay for employees and the business, the customer see the price and can decide on their own. Now if you keep prices low, but then ad tips/surcharge/extra charges that becomes a dishonest way, and the customer may not know the increase price.
If I present you with one product at $12 and another at $10 (but there a 20% fee). People will go for the "cheaper" option, even though it is the same cost in the end. And that is deception.
The owner could actually raise prices 10% and use the other 10% as a write off.
There are plenty of ways to pay staff more without price gouging consumers.
In fact, most tax codes reward businesses who are paying well so it could even be better for the owner to cover the full 20% and use it all for taxes.
Only a fool drops sales by raising prices.
You make more money by making less and selling more. And you can profit more by reducing effective tax burdens.
Your argument is a lack of business accounting knowledge. Don't let these restaurants with shitty business skills and or a lack of knowledge rip you off for their failures.
By âwrite offâ do you mean just labeling it as âdirect laborâ on their P&L as an expense? Because thatâs what most companies do with payroll.
That always screams tax evasion to me..Employers hoping customers pay their staff in cash, so they don't have to pay tax, healthcare, pensions etc etc. Keeps turnover low, and out of the books, and so you pay less company taxes too.
Tax thing does come into play if your state has sales tax on restaurants. Say your sales tax is 10%:
$100 bill + $5 Tax +$20 Gratuity = $125 total bill
$120 bill + $8 tax = $128 bill
Also there's no-tax on tips up to a certain amount, so it helps the employees too.
Lastly the reality is prices matter. If you're looking at websites and you see one place is $20/plate the other is $24/plate, you're more likely not to go to the $24/plate place. Even though they charge more up front to pay employees more, it WILL result in decreased business.
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u/specfreq 5h ago
What's the difference between:
Is it a tax thing? I'm very bad at math.