Until now, I have had no objection to restaurants that tack on an automatic service charge in lieu of a tip. Usually it's 15 to 18 percent. I normally leave 20 percent for good service anyway, so it's no skin off my nose. If the service charge is less than 20 percent, I usually add a few dollars to get to the total.
Now I'm not so sure.
The other night, as I was signing my credit card receipt at Coi, Daniel Patterson's cozy new restaurant in San Francisco, I noticed that the sales tax figure seemed a bit high. The food and wine came to $188 for two, but the tax was more than 20 bucks. (San Francisco's sales tax is 8.5 percent.) I did a quick calculation, and realized that the restaurant had charged me sales tax on the 18 percent service charge. I have never seen that before.
I was reviewing, so I didn't want to make a scene, but I emailed Patterson the next day. He sent me a copy of the rules from the California State Board of Equalization, which clearly require restaurants that add any kind of mandatory charge--including corkage, by the way--to charge sales tax on it.
Patterson says he imposes the mandatory service charge (as do some of the top restaurants in California) to distribute the money among the entire staff. At most restaurants, the service staff manages a voluntary distribution of tips so busboys, expediters and runners all share in the customer's largesse. But state labor laws say that ordinary tips legally belong to the person receiving them. Patterson wants to make sure the team works as a team and shares the rewards.
Of course, all this is moot in Europe, where taxes and service charges are included in the stated price. That would never happen here. It would make it too easy on us customers.
Charging sales tax on a service charge is a double whammy for consumers. Not only do we lose some of the discretion a voluntary tipping system is supposed to creat, but the 8.5 percent sales tax balloons the 18 percent "tip" to 19.5 percent, and then the state gets the difference. I don't know about you, but I would rather the service staff got that money.
Apj Powers — Dallas, TX — May 7, 2006 4:05am ET
Brent Shinyeda — Chandler, AZ — May 7, 2006 7:21pm ET
Rick Smith — Jersey City, NJ — May 7, 2006 10:23pm ET
Paul Rosenberg — May 8, 2006 4:15pm ET
Alan J Kamen — Altamonte Springs, FL — May 12, 2006 6:09pm ET
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