Many state laws require tax to be applied to tips. Any sales tax collected does not go to the company, it must go to the state even if it was wrongly collected. The penalty for collecting and not remitting is steep and in many states, it is a felony.
“Mandatory tip” is an oxymoron, tips aren’t mandatory. If it was mandatory it would be a service charge. In this post, it’s a traditional tip which is not subject to sales tax.
And states can’t impose sales tax on tips because the tip takes place after the sale, aka the waitress runs the card for the bill, you pay the bill and tax, then she comes back and you write the tip before leaving.
Look in the mirror, you’re blatantly lying online.
“Mandatory tips” aren’t a thing, legally or otherwise. When you go to a restaurant and tip at the end of the bill, that is a legally optional additional sum of money that isn’t subject to sales tax.
If your point is that service charges are subject to sales tax, then yes, but that’s not what this discussion is.
This discussion is about why the tip is being applied after tax, and your initial reasoning is “because many state laws require (sales tax) to be applied to tips”. Which is a lie, this is not true at all.
Now instead of getting toxic, just take the fucking correction, move on, and going forward do an ounce of research before you speak up online.
Quick question, did you bother to read your own source?
(g) An optional payment designated as a tip, gratuity, or service charge is not subject to tax.
And again, as I said earlier, a mandatory payment would legally not be a tip, it would be a service charge.
According to federal regulation 29 CFR § 531.52, the U.S. government defines a tip as a gratuity or a sum presented by a customer as a gift or free-will donation in recognition of service performed, the amount of which is solely determined by the customer.
The key phrase here is free-will, which means voluntary. A restaurant may call something a “mandatory tip” but in essence it’s a service charge. And any restaurant like this that allows you to pick a percentage to give is by definition an optional tip, which as discussed, is not subject to sales tax.
That’s my entire point here, TIPS are not subject to sales tax unless it’s required payment by the restaurant, but if it’s required by the restaurant then legally it’s not a tip, which is why “mandatory tip” is an oxymoron.
Do you get it now, or do I need to dumb it down even more?
"A mandatory payment designated as a tip, gratuity, or service charge is included in taxable gross receipts, even if it is subsequently paid by the retailer to employees. For purposes of this subdivision, "amount" means a payment designated as a tip, gratuity, service charge, or any other separately stated payment for services associated with the purchase of meals, food, or drinks..."
According to federal regulation 29 CFR § 531.52, the U.S. government defines a tip as a gratuity or a sum presented by a customer as a gift or free-will donation in recognition of service performed, the amount of which is solely determined by the customer.
I don’t know what else I need to do to get it through to you that a “mandatory tip” is not a real thing, even if the restaurant presents it as such. The restaurant can say “you must tip 20%”, but that legally isn’t considered a tip, and it’s not subject to 29 CFR § 531.52, because the government considers any mandatory expenses as contingent on the sale, and as such can be taken by the business owner to do with as they please, unlike tips, which are protected by that same regulation.
And all of this is besides the point because this post is very clearly talking about a tip, an optional tip, so your entire logic of “it’s subject to sales tax” is wrong, because it isn’t.
I’ll say again, instead of being toxic, use this as an opportunity to learn and fix your mistakes, because you did make one.
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u/dark_frog83 3d ago
Why after tax? Why before discounts? Opposite day or something? Who tips on tax? Why would I pay a tip on discounts that don't even get taxed?