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Automatic gratuities changing for restaurants, customers


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Reported by: Angela Hong
Updated: 1/03 11:39 am Published: 1/03 11:24 am


The automatic tips added to checks at restaurants might become a thing of the past.

Restaurants typically add on about 18 percent tip for large parties. The Internal Revenue Service will tax restaurants for this starting this year.

FOX23's Angela Hong found many restaurants are dropping this practice because of the new rules.

Workers said restaurants simply don't want to deal with the headache and paperwork that comes with this new regulation. The IRS ruling on this was enacted in June 2012, but will start being enforced in 2014.

It's a practice that has irked diners for a long time.

"Why are you forced to pay a certain percentage if your party is a certain size?" asked Scott Scott, a restaurant patron.

Large parties have automatic gratuities, usually somewhere around 15 to 18 percent, added onto their tabs.

Chelsea Howell has been a server for year and understands why restaurants do it.

"I understand wanting to guarantee that server that money because they are putting in that effort because some people do say, ‘Hey! I don't have to tip because no one is making me and it's up to my choice,' and there are people out there who will do that," said Howell, a server at Albert G's BBQ in downtown Tulsa.

Howell told FOX23 she doesn't necessarily agree with it.

"I like to go ahead and let them make the decision and sometimes they leave more like 20 or 25 percent," she said.

Starting this year, the IRS will consider automatic gratuities as a service charge instead of a tip, which means they can be taxed as regular wages and be included in payroll taxes.

Servers will also have to wait to get that money when they get a paycheck instead of taking home the money that night.

The paperwork and taxes involved was too complicated for Albert G's; they decided not to do automatic gratuities when they opened this past November.

"I see it from the guest perspective. If we're doing what we're supposed to do, they are going to take care of us. They are going to take care of our people and they are going to make more money," said Ryan Day, director of operations at Albert G's.

Industry experts believe this new rule means more restaurants will stop the practice, which for some servers could become a problem.

A problem because the federal and Oklahoma minimum wage for servers is only $2.13 per hour, so waiters and waitresses rely heavily on tips.


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The views expressed here do not necessarily represent those of KOKI FOX23 - Tulsa

Mayor Maynot - 1/3/2014 9:03 PM
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Wait staff that are good earn much more than that in tips right straight from the customers hand. It's finally a good thing that as customers we are able to decide just how good the service and dining quality is.
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