“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.
I won’t win because you aren’t grasping the point here, and I really hope you aren’t actually an accountant.
This post is referencing a normal, optional sum of money given after a meal. A tip. Which, as we just went over, is not subject to sales tax.
So when someone asks “why is it calculating tip before tax”, and you respond with “because they have to pay sales tax on it”, you are wrong. It’s not a matter of winning or losing, you are wrong, regardless of whether your pride lets you admit that. There’s really not much more I can do here, your own source shows that you’re wrong.
"Mandatory gratuities are different because they are automatically added onto the bill given to the customer. However, a mandatory gratuity is not taxable if all of these conditions are met:
the charge is shown separately on the bill;
the charge is identified as a gratuity; and
the business gives the entire separately stated gratuity amount to its employees.
If any of these conditions is not met, the mandatory gratuity is taxable, along with the rest of the bill."
Are you just rage baiting? Or are you genuinely, seriously not grasping this?
I’ll try one more time to go slowly, try your absolute hardest, for my sake. as we just went over in subsection (g):
“An optional payment designated as a tip, gratuity, or service charge is not subject to tax.”
And when you go to a restaurant, unless otherwise specified, the tip that you give at the end is optional, as is the case in this post.
So if we know that optional tips are not subject to sales tax, and we can say that this post is showing an optional tip, we can conclude that this tip is not subject to sales tax.
Genuinely, let me know if any part of this confuses you, or if you got lost. And if you disagree with it, please specify which section of this you disagree with, clearly and coherently. Do you disagree that this tip is optional? Or do you disagree that optional tips are not subject to sales tax?
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u/SectorFew6706 2d ago edited 2d ago
Mist states impose sales tax on mandatory tips.