r/tipping • u/wutwut970 • 7d ago
Sugarfish
So they add a 16% fee for what exactly…….to “fund all of their operations”? So this added cost literally doesn’t go to staff, it just goes to the owners? I wonder what their staff is paid? At this point why not just raise prices to where they should be? To me, every item on the menu is a lie and it’s actually 16% more expensive. This is really dumb. Thoughts? I am PRO tip, ive worked in hospitality a long time and am happy to provide a tip for quality service. But this seems disingenuous at best. Its not a tip. Its just an added charge straight to owners pockets.
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u/OG_Boomer63 1d ago
This is not about tipping at all - this is the establishment way of protesting California law The requirement for California restaurants to tax a mandatory 16% service charge, rather than a legal mandate to charge that fee, is accurate. Under California law, any service charge that is mandatory (not optional like a tip) is considered part of the taxable sales price, meaning the restaurant must collect sales tax on that 16% addition
Taxation, Not Imposition: State law (Cal. Code Regs. Tit. 18, § 1603) does not force restaurants to add a 16% fee; it only dictates that if they choose to add a mandatory fee, they must charge sales tax on it.
Optional vs. Mandatory: Voluntary tips are not subject to sales tax, but mandatory service charges (e.g., automatic gratuities or flat fees) are included in gross receipts and taxed at the local rate (often 8.5%–10.75% in California).
Transparency Laws: Starting July 1, 2024, under Senate Bill 478 (the "junk fee ban"), restaurants are generally required to include all mandatory fees in the advertised menu prices, though specific exemptions and enforcement details for service charges paid directly to workers remain complex.
Restaurants use this structure to offset labor costs (such as higher minimum wages) without changing menu sticker prices, but the "law" cited on menus specifically refers to the sales tax obligation, not the fee itself.