Restaurants Dealt Another Blow with Tax on Tips


Restaurants are dealt yet another blow by the government and this time it’s not just about Obamacare it’s about taxes on tips. Ironically enough right after the industry began voicing their concerns over the effects of the new health care reform bill, out comes another change aimed directly at the food industry.

A recently updated tax change has left many restaurant owners scrambling to make changes before the new tax rule fires up in January.

The New Tax Change on Automatic Tipping

Typically when a large party dined at a restaurant there would be an automatic tip calculated into the cost of the meals as a way to ensure the server would get a fair tip after spending all the extra time and effort taking care of their customers.

What has happened is the IRS is now classifying automatic gratuities as a service charge rather than just a standard tip. What this does is now make it so these tips would need to be included in a servers paycheck rather than collected by them at the end of their shift. That correlates into more paperwork for the business owners, a more complicated payroll and of course a death blow to the servers that depend on those tips to get by.

Why target a group such as the wait staff at restaurants to bilk more tax money out of?

Similar to the steps mass amounts of restaurants are taking in regards to Obamacare which is the slashing of employee hours so they don’t meet the threshold for healthcare coverage. Now restaurants are beginning to remove the automatic tip added to those tabs.

Could there be a connection between the two? Is perhaps the government trying to find a way to make it so those restaurants, that are cutting employee hours, will have to factor tips into the staff’s hourly wage?

If they are, it was a bad move because industry experts are figuring the majority if not every restaurant in the U.S. will remove those auto-tips before the change even takes place.

Not every waiter or waitress is lucky enough to work at a high end restaurant in NYC or Chicago and that should be factored into the equation. Many of these servers are barely getting by and figuring out ways to tax them higher, when they are already getting paid less than minimum wage is absolutely absurd.

We need to be a country that encourages and promotes business ownership as well as fair pay for employees not one that tries to weasel more and more tax money from not just business owners but the employees that work for their companies.

The wait staffs across the country already deal with ignorance, arrogant rude customers and having to handle plates covered in people’s have eaten food as it is. Why now try to stuff your hands into their cookie jar?

Unfortunately servers are rallying behind restaurants move to remove the automatic tips before the tax changes take place. It looks like they will have to deal with getting stiffed by a percentage of those large groups that they wait on instead.

So with that said, how do you feel about automatic gratuities and these changes that are on the horizon?

The Beautiful Image Above is by Alan Light