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Most Restaurants Forgoing Auto-gratuity For Large Parties

La Jolla, California
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Most Restaurants Forgoing Auto-gratuity For Large Parties

Hi!

Most of us are probably accustomed to an automatic gratuity being included in our bill if we dined with a large group of people (typically 6 or more).

However, majority of restaurants either have terminated or will most likely end the practice this year due to changes in Federal Tax Law.

Be sure to review the bill and check with your server.

Happy dining, everyone!

Santa Clara...
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1. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

Wow that's interesting. Is this a local, state, or national thing? Effective when?

San Diego
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2. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

It always states on the bill if the automatic gratuity is added or not so checking your bill is always the correct thing to do.

It would be helpful if you explained what change was made in the Federal tax law and how you know that "majority of restaurants" have terminated this practice.

Since you say it is a Federal tax change then it will be a national issue not just local.

Florida
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3. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

As stated above, new federal regulations forbid such a practice.

Here in Florida restaurants have made the change. Thank God!

Santa Clara...
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4. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

We ate at a local restaurant last night with 14 people. The tip was automatically put in the check.

San Jose, California
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5. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

Ahhhh, so here is the deal. The new law has nothing to do with whether a restaurant can charge an automatic gratuity, just how that gratuity is classified for tax purposes: regular wages or a tip. And of course, how this is classified makes a difference in how a business has to process and pay taxes - payroll, SS, etc.

"As of Jan. 1, the IRS has reclassified an automatic tip as part of the server’s wages. Jeff Pickering is a public accountant and he says he had several clients stop automatic tipping because it was too much work to process.

"Maybe some of the larger chains will have the infrastructure to manage this, but for the small restaurant, I think they will go away," he said.

Under the IRS ruling, Rev. Ruling 2012-18, a sharper distinction is drawn between tips and service charges.

Under the new rules, to be a tip:

1.The payment must be made free from compulsion

2.The customer must have the unrestricted right to determine the amount

3.The payment should not be the subject of negotiation or dictated by employer policy

4.Generally, the customer has the right to determine who receives the payment

Automatic gratuities don’t meet these criteria."

http://www.kvue.com/news/state/238795231.html

So at this point, it appears unclear how many restaurants will continue the practice and how many won't.

Vancouver...
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6. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

Boy, this post will throw the Aussies and Kiwis in a tizzy. Chuck.

San Diego
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7. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

Thanks for looking up the exact information!!

Oregon Coast
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8. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

LOL Chuck!

Thanks november_moon. So if we plan to dine out in a group, we should take a copy of this new law with us ;-)

Corona del Mar, CA
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9. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

To be clear, there is no new "law". This is an IRS "ruling" clarifying for tax reporting purposes what is a "wage" and what is a "gratuity".

taxfoundation.org/blog/irs-crackdown-automat…

If a restaurant still wants to tack on the auto gratuity they may, nothing in this ruling prevents that. The only change is how the restaurant reports this to the IRS.

San Jose, California
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10. Re: Most Restaurants Forgoing Auto-gratuity For Large Parties

Yep. Restaurants can still handle the gratuity however they choose. The automatic gratuity just make processing payroll and taxes more complex, so many restaurants may choose to skip the automatic gratuity.