We have all had the experience of going to a restaurant with a large party and finding that 18% tip charge on our bill. We can also find them on meals delivered to our hotel rooms. Any company that opposes those charges must be on notice that beginning in 2014 automatic gratuities are classified as service charges rather than tips. This means that while the employee will be taxed the same, the employer will lose a special tax credit available for paying its share of payroll taxes on the gratuities. For the rest of us the impact means there will be no more automatic gratuities created but rather suggestions to pay a gratuity.
To see the IRS ruling click here.
