Re: Restaurants that include the tip in the bill. Ud 27, 58

[Minmom3]

OP here with a small update.

I just received a letter from the credit card company. They state:

-We have issued credit to your account for the disputed charge.
-Although we consider your dispute resolved, the merchant has an opportunity to review any information and provide additional documentation to support why they feel the transaction is valid.
-In the event we receive additional information from the merchant, we will forward any relevant documentation, and let you know if additional information is needed to support your dispute.
-We recommend that you retain copies of all documentation regarding your dispute.

Hopefully, I will not come back with another update saying that the restaurant is fighting the charge. Luckily, it's about $7 so it won't break my budget, but I don't plan to go back there.

Hit 'em hard with Yelp and Facebook.  Use social media to express your displeasure with what they did, and tell the world WHAT THEY DID.  Let more people than you vote with your wallet....     There's an old adage, whose words I don't remember exactly "Good news spreads; bad news spreads much further".  Let their behavior be that bad news!

[gmatoy]

Barb, where do you live?

Here in the US, waitstaff usually make about $2.30 an hour - way below minimum wage. They are expected to make it up in tips. And they are taxed on the tips they are assumed to make.

So, not tipping a server is stealing from them. They will pay income taxes on a tip whether or not they actually it.

Until we catch up with the rest of the civilized world, and restaurants pay servers what they are worth, it is up to us diners to make it up.

This is actually not true. If a server can document that they did not get that amount in tips, they do not have to pay for that amount. However, it is difficult to prove you didn't average at least that amount. Still, I know one woman who was able to get the IRS to grant her a lesser amount because she had records that proved she was not getting that amount in tips, based on the type of restaurant and with the records that she and others had kept.

[mmswm]

Barb, where do you live?

Here in the US, waitstaff usually make about $2.30 an hour - way below minimum wage. They are expected to make it up in tips. And they are taxed on the tips they are assumed to make.

So, not tipping a server is stealing from them. They will pay income taxes on a tip whether or not they actually it.

Until we catch up with the rest of the civilized world, and restaurants pay servers what they are worth, it is up to us diners to make it up.

This is actually not true. If a server can document that they did not get that amount in tips, they do not have to pay for that amount. However, it is difficult to prove you didn't average at least that amount. Still, I know one woman who was able to get the IRS to grant her a lesser amount because she had records that proved she was not getting that amount in tips, based on the type of restaurant and with the records that she and others had kept.

That's exactly the problem my friend ran into when she got audited.  She couldn't prove it.  This was also quite a few years ago, so the IRS may have adjusted their algorithms for servers at buffet places, who typically don't get as much as regular sit-down places.

[MommyPenguin]

Barb, where do you live?

Here in the US, waitstaff usually make about $2.30 an hour - way below minimum wage. They are expected to make it up in tips. And they are taxed on the tips they are assumed to make.

So, not tipping a server is stealing from them. They will pay income taxes on a tip whether or not they actually it.

Until we catch up with the rest of the civilized world, and restaurants pay servers what they are worth, it is up to us diners to make it up.

I'm not sure I understand that logic. US Federal law actually requires the restaurant to make up any difference between their base wage plus tips and standard minimum wage.

So say they worked 10 hours one week. With standard minimum wage of $7.25, their income would have been $72.50. They will be taxed on $72.50 unless they report a higher income based on additional tips.

Say they only made $10 in tips that week and with the base wage of $2.13 their income would have been $31.30.  Their employer is required by federal law to make up the difference between the $72.50 and the $31.30. 

That is why I do not believe you are "stealing" from them based on withholdings.

This is the way I understand it too. Can any servers/former confirm that this works in practice and not just in theory?

I know that when we were in high school, a friend of mine (and later a boyfriend) worked at a restaurant PH.  The base wage was something in the $2 range and the minimum wage was, at the time, just under $7/hour.  He always had to stay about an hour after closing time to clean, during which time he was earning the $2/hour.  Sometimes they had a shipment come in during the night, and he'd have to stay 2-3 hours late to help unload the shipment, again at the $2/hour rate.  Sometimes he'd have earned enough in tips during the day that his overall average was at least minimum wage (although I don't think that's how it's supposed to work, I'm pretty sure that businesses are required to pay them for any *hours* when they aren't earning tips), but not always, so sometimes he ended up not averaging minimum wage for the day.  He figured if he complained he'd lose his job, though, so he didn't bother.  He figured it was better than his last job as a grocery store bagger, where he was required to join the union, the dues for which took his *entire* first paycheck for a 10-week summer job (and they didn't tell employees that they were required to join the union or what the dues were until after they just didn't receive a first paycheck).

[*inviteseller]

Although the owners of the place I worked at were not the most pleasant (the wife, I swear, never smiled), they were fair.  If you were a server, you made the servers wage + tips (and they required we keep a little book of checks/tips each day) and we did not share our tips unless someone else helped us with a large table, and it was up to us, if we were hostess for the day (it was rotated) we were paid minimum wage, and if we had to pull bar duty (rarity but occasional help), we were paid minimum and split the tips with the other bartender (always 2) because bar tips were never as much as waitressing.  We all felt like they cared about how they treated us and that it should be fair.

[JenJay]

I'm from Oregon where the minimum wage is currently $8.95 and servers do not get their pay reduced. In fact most of the restaurant employees I knew made an hourly wage over minimum plus tips. Everywhere you go you see tip jars on the counter and the expected tip amount on services (restaurants, salons, etc.) is 20%. I was a mimimum wage employee too (no tips) and in all honesty it drove me crazy.

We're in Virginia now and we've been told we're exceptionally good tippers because we still do 20%. Apparently average is 10-15%, though that's just what a few people have told us, I don't know if that's really the average. I recently read that the new expectation in some areas is 25%. If that catches on I'm going to have to stop eating out because, as a family of 5, it already adds a chunk to our bill as is. Where does it stop?

[Hmmmmm]

I'm from Oregon where the minimum wage is currently $8.95 and servers do not get their pay reduced. In fact most of the restaurant employees I knew made an hourly wage over minimum plus tips. Everywhere you go you see tip jars on the counter and the expected tip amount on services (restaurants, salons, etc.) is 20%. I was a mimimum wage employee too (no tips) and in all honesty it drove me crazy.

We're in Virginia now and we've been told we're exceptionally good tippers because we still do 20%. Apparently average is 10-15%, though that's just what a few people have told us, I don't know if that's really the average. I recently read that the new expectation in some areas is 25%. If that catches on I'm going to have to stop eating out because, as a family of 5, it already adds a chunk to our bill as is. Where does it stop?

It's funny, but the only people I hear this from regulary are the people who work in the industry or have close ties to the industry.

[Venus193]

25% is fairly common in Manhattan's upscale places.  Most other places it's 20%.

[kareng57]

25% is fairly common in Manhattan's upscale places.  Most other places it's 20%.

And I still don't understand this at all.  I've heard the justification is the "high cost of living in NYC", but if the menu prices are double those in other mainstream NA cities, then 20% as a tip, in $$$ amount,  is way higher than in other cities.

[Venus193]

I don't know what waiters are paid in NYC but I know it's less than minimum wage. 

[Twik]

I don't know what waiters are paid in NYC but I know it's less than minimum wage.

But that's not different than most other servers in the US.

I agree that it appears that there is pressure being put on customers to pay an (unacknowledged) business cost (that of the restaurant being in Manhattan) though tipping, which is not a great solution.

[RooRoo]

FYI on tipping: I was in the mood to do some research, and here are the results.

I just checked the DOL chart (http://www.dol.gov/whd/state/tipped.htm), and there are only five states in the US that mandate paying servers at or above the federal minimum wage of $7.25: AK, CA, NV, OR and WA. Two more mandate it only for large businesses (based on gross receipts): MN and MT.

New York has 3 rates, for different kinds of service jobs; I’m guessing that it’s based on the expected amount of tips. The highest rate is $5.65. I’m trying to imagine living on $226/week in NYC. 

There is more good info here: http://www.dol.gov/whd/regs/compliance/whdfs15.pdf

I looked for info on how tips are taxed – couldn’t find anything at IRS.gov that treats tips differently than other income. So I am assuming that a “tipped employee” with, erm, poor record-keeping  , or making lousy tips, would be taxed as if they earned minimum wage. (Because, yeah, the employer does have to make it up if they earn less.)

If you look at the chart in the first link, it will tell you the difference between the hourly and the minimum wage; one could use this to determine a minimum tip for lousy service. 

[Hmmmmm]

FYI on tipping: I was in the mood to do some research, and here are the results.

I just checked the DOL chart (http://www.dol.gov/whd/state/tipped.htm), and there are only five states in the US that mandate paying servers at or above the federal minimum wage of $7.25: AK, CA, NV, OR and WA. Two more mandate it only for large businesses (based on gross receipts): MN and MT.

New York has 3 rates, for different kinds of service jobs; I’m guessing that it’s based on the expected amount of tips. The highest rate is $5.65. I’m trying to imagine living on $226/week in NYC. 

There is more good info here: http://www.dol.gov/whd/regs/compliance/whdfs15.pdf

I looked for info on how tips are taxed – couldn’t find anything at IRS.gov that treats tips differently than other income. So I am assuming that a “tipped employee” with, erm, poor record-keeping  , or making lousy tips, would be taxed as if they earned minimum wage. (Because, yeah, the employer does have to make it up if they earn less.)If you look at the chart in the first link, it will tell you the difference between the hourly and the minimum wage; one could use this to determine a minimum tip for lousy service. 

From what I remember, the IRS assumes a minimum of 8% tips for sales.  So if a server has sales of $1000 but only reports tips of $50, the restaurant still has to report an income of their hourly wage plus $80 in tips. If a restaurant doesn't have a point of sale that tracks sales by employee, then they take total sales calculate 8% of total sales, divide by tip based servers working and they report that as the servers income in addition to their minimum wage. 

This is one reason servers like cash. If they sale $1000, average 18% in tips, that's income of $180 in tips. If 50% of that is in cash, some will "pocket" the cash and not report it. Then the restaurant only reports the remaining 9% (half on the average 18%) in credit card tips to the IRS as the servers income.

[MrTango]

FYI on tipping: I was in the mood to do some research, and here are the results.

I just checked the DOL chart (http://www.dol.gov/whd/state/tipped.htm), and there are only five states in the US that mandate paying servers at or above the federal minimum wage of $7.25: AK, CA, NV, OR and WA. Two more mandate it only for large businesses (based on gross receipts): MN and MT.

New York has 3 rates, for different kinds of service jobs; I’m guessing that it’s based on the expected amount of tips. The highest rate is $5.65. I’m trying to imagine living on $226/week in NYC. 

There is more good info here: http://www.dol.gov/whd/regs/compliance/whdfs15.pdf

I looked for info on how tips are taxed – couldn’t find anything at IRS.gov that treats tips differently than other income. So I am assuming that a “tipped employee” with, erm, poor record-keeping  , or making lousy tips, would be taxed as if they earned minimum wage. (Because, yeah, the employer does have to make it up if they earn less.)If you look at the chart in the first link, it will tell you the difference between the hourly and the minimum wage; one could use this to determine a minimum tip for lousy service. 

From what I remember, the IRS assumes a minimum of 8% tips for sales.  So if a server has sales of $1000 but only reports tips of $50, the restaurant still has to report an income of their hourly wage plus $80 in tips. If a restaurant doesn't have a point of sale that tracks sales by employee, then they take total sales calculate 8% of total sales, divide by tip based servers working and they report that as the servers income in addition to their minimum wage. 

This is one reason servers like cash. If they sale $1000, average 18% in tips, that's income of $180 in tips. If 50% of that is in cash, some will "pocket" the cash and not report it. Then the restaurant only reports the remaining 9% (half on the average 18%) in credit card tips to the IRS as the servers income.

When I worked at a restaurant (12 years ago), the restaurant reported (and withheld taxes) based on the greater of 8% of sales or the server's credit card tips.

[WillyNilly]

25% is fairly common in Manhattan's upscale places.  Most other places it's 20%.

And I still don't understand this at all.  I've heard the justification is the "high cost of living in NYC", but if the menu prices are double those in other mainstream NA cities, then 20% as a tip, in $$$ amount,  is way higher than in other cities.

I can assure you Manhattan restaurant prices are not "double those in other mainstream NA cities". Not even close.

Yes there are some very upscale restaurants that charge a lot, but type for type, prices in Manhattan are probably about 10-20% more then the rest of the country and only about 5-10% more then other major cities if at all.

If you go to a chain restaurant, for example I just did a quick check or three Olive Garden menu items across the country. All the menus offered the "buy one get one" deal at $12.95. A la carte prices were varied, and yes most expensive in Manhattan, but not double by a long shot.

Manhattan:
Bruschetta $9.50
Lasagne Classico $18.50
Create your own pizza $15.95

Brooklyn
Bruschetta $7.25
Lasagne Classico $14.25
Create your own pizza $12.75

New Jersey (random town)
Bruschetta $6.95
Lasagne Classico $13.75
Create your own pizza $11.95

Chicago
Bruschetta $7.25
Lasagne Classico $13.95
Create your own pizza $12.50

San Diego
Bruschetta $7.95
Lasagne Classico $15.50
Create your own pizza $13.95

Burbank
Bruschetta $7.95
Lasagne Classico $15.50
Create your own pizza $13.95

Washington DC (actually Hyattsville)
Bruschetta $6.95
Lasagne Classico $11.95
Create your own pizza $11.95

Boston (Dorchester)
Bruschetta $7.25
Lasagne Classico $14.25
Create your own pizza $12.75