The service charge is not a tip or gratuity, and is an added fee controlled by the restaurant that helps subsidize the staff wages so that management doesn’t have to while still seeming to have reasonable prices on the menu. Also, management takes a cut as it subsidizes their wages too.
Edit: I get why this upsets some people, but the downvote button is not a disagree button. I merely restated the restaurant’s explanation in plain language. I’m not agreeing with it…
By tradition, the service charge is supposed to be paid to the staff. Therefore, it’s not customary to tip when you’re assessed a service charge, although many restaurants choose to ask for a tip anyway.
If you work in a restaurant that charges a service charge but pockets it… you’re being robbed.
Unfortunately, this isn’t true anymore. At least in PA.
34 Pa. Code 231.114. Service charges.
§ 231.114 b
The notice required by subsection (a) must state that the administrative charge is for administration of the banquet, special function or package deal and does not include a tip to be distributed to the employees who provided service to the guests.
If this restaurant was passing the entire service charge to its waitstaff, it would be advantageous to call it a gratuity and exempt it from sales and income tax. The IRS does not tax tips/gratuities as income.
By charging (state) sales tax on the service fee, they also have to declare it as revenue, which increases their income and thus their income tax. They have to pay a portion of that service fee in income tax, so they aren’t going to be passing the full amount to their waitstaff. The restaurant will be keeping the bulk of that service fee.
That’s my point. This restaurant is try to bait and switch their customers by giving a misleading food price and adding a service charge. It is like a cell phone company adding garbage fees.
As for my initial comment - if you add a percentage for service, that ends my obligation to tip.
Ah! I see. You were talking exclusively about not coming back into US restaurant, not restaurant in general anywhere in the world. It was not clear for me.
And we also charge you for eating in as well, that’s another $10.
Some areas actually have different pricing for eating in vs taking out, as it’s treated differently by the tax laws. Some areas also tax differently based on if it’s cold or hot/cooked food, so a toasted sandwich costs a bit more than an untoasted one. Very small differences, though.
Yeah, my post was a bit of hyperbole, but I’ve been to a fancy restaurant a while ago, where they did make you pay for cutlery and also for the table separately.
The problem is, this is still decietful. If this is an issue then the correct move would be to make every item on the menu 18% more expensive as a base. Because now, they still get to say “oh well our prices are still low come eat here and get “X item” for “Y price” but that’s not true anymore because of the service charge. It’s just a way to keep menu items lower in price but increase the price at the end.
I’m an American, and I can’t explain this to you. If I saw this on a receipt, I would write down on it that I’m tipping $0 because of the service fee and to consider the fee my tip.
It doesn’t make sense to any sane person. But basically:
The restaurant feels that costs have increased and in order to remain profitable they must raise prices. Instead of raising prices on the menu, take the canoli as an example, from $11 to $13, they decided to add it after the calculation.
This means the customer may go out with an idea of what they would like to spend (maybe it’s a special treat for them) orders based on the menu, figures tip and tax… Expects to be out for $100… But surprise! You owe a fucking service charge.
Now-- I’m not into this particular restaurant’s finances. Let’s be generous and assume they need to charge more to break even. This is the shady (and should be illegal) way to do this. They should instead raise prices and be honest with the customer what they feel they need to charge.
Except you’re wrong. It is a tip because the tip is the service charge. The tip specifically is “we pay them less than minimum wage and your tip covered the rest of their service cost”. A tip AND a service charge, especially a service charge not levied because there were X+ people at the table, is double dipping on the tip. Both fees are for the same thing. Either increase prices or increase the tip(or pay your workers fairly and don’t expect me to subsidized the rest with these secret fees). Make them upfront and honest. This isn’t. This is a perfect invitation to say “you already charged me for the service, so no tip is needed, because that’s what it is for”.
The tip specifically is "we pay them less than minimum wage
Not everywhere. Some areas don’t allow wages that are lower than minimum wage for tipped jobs. The area I live in in California is around $17-18/hr minimum wage regardless of if the job is tipped or not.
Except you’re wrong. Service charges are not considered tips under FLSA rules within the US. Many states and local jurisdictions have special rules for tipped wages, how they’re taxed and those taxes are collected, and service charges are not included in that definition.
Nice reading comprehension. The TIP is a service charge. You got that backwards buddy. So a service charge and a tip is service charge x2. Or you’re admitting that a tip is only for “above and beyond thanks”, in which case it’s not mandatory and this is again a scam.
Service Charges: A compulsory charge for service, for example, 15 percent of the bill, is not considered a tip under the FLSA. Sums distributed to employees from service charges are not tips, but may be used to satisfy the employer’s minimum wage and overtime pay obligations under the FLSA.
A place implementing a service charge cannot classify it as a tip, even if it’s 100% passed onto the employee… a mandatory charge is not a tip, even if the restaurant encourages you to treat it that way. Certain states and jurisdictions tax tips differently than regular wages, and service charges are wages, not tips.
A tip is money paid directly to the worker providing the service. The restaurant can’t keep any part of it. They are not taxed on it, either as sales tax or income tax. That money is only counted as income to the worker.
This service fee was subject to sales tax. It will also be subject to income tax by the restaurant. The restaurant gets to keep as much of it as they want.
“Mandatory gratuities” are tips that the restaurant obligates the customer pay to the waitstaff. Where these are charged, you are not allowed to stiff the waitstaff. The restaurant cannot keep any part of that gratuity.
Tips/gratuities and service fees are not the same thing at all.
I’m not talking the law, I’m talking what the tip actually is in practice. It’s the service charge. You’re paying for the server to serve you. The tip isn’t for the food. It for the server serving. Just because you’ve been conned and guilted into accepting this as normal doesn’t make it right. And just because it’s taxed doesn’t mean it’s still not extra income to the resturaunt. Would it be ok if I mugged you but paid taxes on the money and gave it a cutesy name?
A “service fee” is for the restaurant existing. Service fees do not go directly to the staff. The restaurant keeps most of that service fee.
I mentioned taxes not to suggest that the practice is legitimate, but to demonstrate that the money is income to the restaurant. Tips are not income to the restaurant. Tips are income only to the staff.
I acknowledge that there is no significant distinction to the customer between a tip and a service fee, but there is a highly relevant distinction between the two for the restaurant and the server. The service fee this restaurant is charging is money stolen from its staff.
This restaurant could support its workers by adding a mandatory gratuity to the bill, in which case I would agree that no tips should be paid. But a service charge is not a tip. A service charge is not a gratuity. A service charge is not paid to the servers. A service charge is kept by the restaurant.
If they charged a mandatory gratuity, I would agree with you. An 18% mandatory gratuity is an 18% tip to the waitstaff; you are not expected to pay an additional tip on top of that.
A tip is money directly to the waitstaff. The restaurant can’t touch it. The restaurant is not charged sales tax nor income tax on money collected as tips. When they collect a gratuity, it goes directly to the staff.
This “service fee” was taxed. It did not go directly to the waitstaff; it was recorded as sales revenue, and thus income to the restaurant. The restaurant is being taxed on it before any of it gets to the staff. They would only do that if they are keeping a part of it, which they could not do if it was considered a “tip” or “gratuity”.
Charging a “service fee” is a legal way for the restaurant to steal tips from employees, while making you think they are paying it to their staff.
Most likely, they pay minimum tipped wage plus $1/hr. They are making $3.13/hr plus tips instead of $2.13/hr plus tips. That extra $1 is the higher “base wage” they are talking about.
About $0.75 of that $17.22 service fee goes toward increasing the “base wage”, with the rest counted as income to the restaurant.
This is not the perfect opportunity to say “you already charged me for the service”. This is the perfect opportunity to name and shame this scumbag restaurant for its shitty business practices, and never eat their again.
They probably pay $1/hr over minimum tipped wages. About $0.75 of that $17.22 fee goes to paying that increased wage, and the rest is pocketed.
If they wanted to subsidize worker wages, they would include a mandatory gratuity rather than a service fee. Gratuities are passed directly to workers.
The service charge is not a tip or gratuity, and is an added fee controlled by the restaurant that helps subsidize the staff wages so that management doesn’t have to while still seeming to have reasonable prices on the menu. Also, management takes a cut as it subsidizes their wages too.
Edit: I get why this upsets some people, but the downvote button is not a disagree button. I merely restated the restaurant’s explanation in plain language. I’m not agreeing with it…
If you charge me for service, I’m not paying extra for service.
Call it what it is - a junk fee so they can make their prices look lower than they are. I wouldn’t go to this restaurant a second time.
By tradition, the service charge is supposed to be paid to the staff. Therefore, it’s not customary to tip when you’re assessed a service charge, although many restaurants choose to ask for a tip anyway.
If you work in a restaurant that charges a service charge but pockets it… you’re being robbed.
Unfortunately, this isn’t true anymore. At least in PA.
34 Pa. Code 231.114. Service charges.
§ 231.114 b
The notice required by subsection (a) must state that the administrative charge is for administration of the banquet, special function or package deal and does not include a tip to be distributed to the employees who provided service to the guests.
https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/034/chapter231/s231.114.html&d=reduce
If this restaurant was passing the entire service charge to its waitstaff, it would be advantageous to call it a gratuity and exempt it from sales and income tax. The IRS does not tax tips/gratuities as income.
By charging (state) sales tax on the service fee, they also have to declare it as revenue, which increases their income and thus their income tax. They have to pay a portion of that service fee in income tax, so they aren’t going to be passing the full amount to their waitstaff. The restaurant will be keeping the bulk of that service fee.
Heck, I wouldn’t even pay this restaurant the first time. I’m out. You ain’t making me pay extra after the fact.
The cost of food in American restaurants includes service charger. It just not itemized. Waiters do have salaries, so it comes from somewhere.
That’s my point. This restaurant is try to bait and switch their customers by giving a misleading food price and adding a service charge. It is like a cell phone company adding garbage fees.
As for my initial comment - if you add a percentage for service, that ends my obligation to tip.
Ah! I see. You were talking exclusively about not coming back into US restaurant, not restaurant in general anywhere in the world. It was not clear for me.
Hey, look at our cheap food!
Oh, btw, we didn’t tell you, but it’s actually 18% more expensive than the prices on the menu.
Also, it’s $10 extra for the plates and silverware.
And we also charge you for eating in as well, that’s another $10.
And if you don’t tip on top of that, we get really angry.
Please leave a 5 star review!
Some areas actually have different pricing for eating in vs taking out, as it’s treated differently by the tax laws. Some areas also tax differently based on if it’s cold or hot/cooked food, so a toasted sandwich costs a bit more than an untoasted one. Very small differences, though.
Yeah, my post was a bit of hyperbole, but I’ve been to a fancy restaurant a while ago, where they did make you pay for cutlery and also for the table separately.
But they didn’t have a take-away option.
I was talking about service charge, not tips.
American waiters get paid, Parisian ones do it for the pleasure of serving their fellow man.
The problem is, this is still decietful. If this is an issue then the correct move would be to make every item on the menu 18% more expensive as a base. Because now, they still get to say “oh well our prices are still low come eat here and get “X item” for “Y price” but that’s not true anymore because of the service charge. It’s just a way to keep menu items lower in price but increase the price at the end.
Sounds like it does much the same thing as tipping then, right? But then the receipt says you should pay the service charge and a tip on top 🤔
I’m not American so maybe someone can explain this to me, haha…
I’m an American, and I can’t explain this to you. If I saw this on a receipt, I would write down on it that I’m tipping $0 because of the service fee and to consider the fee my tip.
If you live in a place where this is becoming the norm, that’s exactly what you do.
A far more above board and less vibes-based way to pay.
It doesn’t make sense to any sane person. But basically:
The restaurant feels that costs have increased and in order to remain profitable they must raise prices. Instead of raising prices on the menu, take the canoli as an example, from $11 to $13, they decided to add it after the calculation.
This means the customer may go out with an idea of what they would like to spend (maybe it’s a special treat for them) orders based on the menu, figures tip and tax… Expects to be out for $100… But surprise! You owe a fucking service charge.
Now-- I’m not into this particular restaurant’s finances. Let’s be generous and assume they need to charge more to break even. This is the shady (and should be illegal) way to do this. They should instead raise prices and be honest with the customer what they feel they need to charge.
Except you’re wrong. It is a tip because the tip is the service charge. The tip specifically is “we pay them less than minimum wage and your tip covered the rest of their service cost”. A tip AND a service charge, especially a service charge not levied because there were X+ people at the table, is double dipping on the tip. Both fees are for the same thing. Either increase prices or increase the tip(or pay your workers fairly and don’t expect me to subsidized the rest with these secret fees). Make them upfront and honest. This isn’t. This is a perfect invitation to say “you already charged me for the service, so no tip is needed, because that’s what it is for”.
Not everywhere. Some areas don’t allow wages that are lower than minimum wage for tipped jobs. The area I live in in California is around $17-18/hr minimum wage regardless of if the job is tipped or not.
Except you’re wrong. Service charges are not considered tips under FLSA rules within the US. Many states and local jurisdictions have special rules for tipped wages, how they’re taxed and those taxes are collected, and service charges are not included in that definition.
https://www.dov.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa
Nice reading comprehension. The TIP is a service charge. You got that backwards buddy. So a service charge and a tip is service charge x2. Or you’re admitting that a tip is only for “above and beyond thanks”, in which case it’s not mandatory and this is again a scam.
You might want to read it again
A place implementing a service charge cannot classify it as a tip, even if it’s 100% passed onto the employee… a mandatory charge is not a tip, even if the restaurant encourages you to treat it that way. Certain states and jurisdictions tax tips differently than regular wages, and service charges are wages, not tips.
A tip is money paid directly to the worker providing the service. The restaurant can’t keep any part of it. They are not taxed on it, either as sales tax or income tax. That money is only counted as income to the worker.
This service fee was subject to sales tax. It will also be subject to income tax by the restaurant. The restaurant gets to keep as much of it as they want.
“Mandatory gratuities” are tips that the restaurant obligates the customer pay to the waitstaff. Where these are charged, you are not allowed to stiff the waitstaff. The restaurant cannot keep any part of that gratuity.
Tips/gratuities and service fees are not the same thing at all.
I’m not talking the law, I’m talking what the tip actually is in practice. It’s the service charge. You’re paying for the server to serve you. The tip isn’t for the food. It for the server serving. Just because you’ve been conned and guilted into accepting this as normal doesn’t make it right. And just because it’s taxed doesn’t mean it’s still not extra income to the resturaunt. Would it be ok if I mugged you but paid taxes on the money and gave it a cutesy name?
A “tip” is for the server serving.
A “mandatory gratuity” is for the server serving.
A “service fee” is for the restaurant existing. Service fees do not go directly to the staff. The restaurant keeps most of that service fee.
I mentioned taxes not to suggest that the practice is legitimate, but to demonstrate that the money is income to the restaurant. Tips are not income to the restaurant. Tips are income only to the staff.
I acknowledge that there is no significant distinction to the customer between a tip and a service fee, but there is a highly relevant distinction between the two for the restaurant and the server. The service fee this restaurant is charging is money stolen from its staff.
This restaurant could support its workers by adding a mandatory gratuity to the bill, in which case I would agree that no tips should be paid. But a service charge is not a tip. A service charge is not a gratuity. A service charge is not paid to the servers. A service charge is kept by the restaurant.
If they charged a mandatory gratuity, I would agree with you. An 18% mandatory gratuity is an 18% tip to the waitstaff; you are not expected to pay an additional tip on top of that.
A tip is money directly to the waitstaff. The restaurant can’t touch it. The restaurant is not charged sales tax nor income tax on money collected as tips. When they collect a gratuity, it goes directly to the staff.
This “service fee” was taxed. It did not go directly to the waitstaff; it was recorded as sales revenue, and thus income to the restaurant. The restaurant is being taxed on it before any of it gets to the staff. They would only do that if they are keeping a part of it, which they could not do if it was considered a “tip” or “gratuity”.
Charging a “service fee” is a legal way for the restaurant to steal tips from employees, while making you think they are paying it to their staff.
Most likely, they pay minimum tipped wage plus $1/hr. They are making $3.13/hr plus tips instead of $2.13/hr plus tips. That extra $1 is the higher “base wage” they are talking about.
About $0.75 of that $17.22 service fee goes toward increasing the “base wage”, with the rest counted as income to the restaurant.
This is not the perfect opportunity to say “you already charged me for the service”. This is the perfect opportunity to name and shame this scumbag restaurant for its shitty business practices, and never eat their again.
Allegedly
But If that’s the reality, I feel no need to add a tip.
They probably pay $1/hr over minimum tipped wages. About $0.75 of that $17.22 fee goes to paying that increased wage, and the rest is pocketed.
If they wanted to subsidize worker wages, they would include a mandatory gratuity rather than a service fee. Gratuities are passed directly to workers.
This is truly scummy behavior.
Yeah that’s a pretty shit reason to levy this fee unsuspectingly.
In Australia this would be illegal drip pricing. JUST INCLUDE EVERYTHING IN THE PRICE OF THE FOOD! Is it so hard?
Absolutely wild you also don’t add tax in the price in the US.
Is it too much to ask to just be told the price upfront on the menu?
The downvote button is a lazy disagree button, but people is also dumb.