How does the 2014 IRS Rev. Ruling 2012-18 affect restaurant service staff and restauranteurs?
2014 has brought many changes to the restaurant industry and one of the most buzzed about topics is Rev. Ruling 2012-18 according to news channel WFAA. This ruling implies that restauranteurs must differentiate between automatic gratuities and voluntary tips which can ultimately cost restaurants big bucks. Any sort of gratuity that compels patrons to automatically pay an additional percentage on their meals and services is no longer considered a tip and must be calculated as part of a server’s wages.
Since the wages of servers are typically very low, and often below minimum wage, many restaurants initially enacted automatic gratuities to ensure that their employees would receive a fair wage for their services. By imposing this law, many restaurants have opted out of automatic gratuities as they are now responsible for tracking and processing these payments as part of their employees’ wages despite the fact that server’s are required to claim their tips when they file their taxes either way. Paying additional funds to have an accountant manage these additional figures is often far outside of the reach of many smaller, independent businesses in the food industry.
From a consumer standpoint, this new ruling will give patrons a chance to evaluate and gauge the services that are provided to them and tip what they see fit. This should also be an incentive for restaurants to closely monitor their servers and ensure that they are giving customers the best dining experience possible. Servers should also be encouraging customers to order more food and beverages in order to earn significant tips so that restaurant owners are not required to boost a server’s pay should they not earn fair wages via gratuities.
Many times, customers simply overlook the total tip amount when a gratuity is automatically added for them, so with restaurants revoking automatic tipping policies patrons may actually tip at a higher percentage rate when they have to do the math themselves. Some restaurants are completely overlooking the new ruling and have opted to track automatic gratuities and take on the additional fees from their accountants in order to keep he process easier for employees.
Ultimately, the impact that each restaurant sees from this new ruling will boil down to good business practices. If you are training your staff to provide the highest quality service and offer top of the line food and beverage choices to your customers, then many customers will tip accordingly whether you impose an automatic gratuity or not.
