Comment by sebmellen | Hacker News Reader

Comment by sebmellen | Hacker News Reader

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That is illegal. You should report the business to the IRS.

> “Revenue Ruling 2012-18 reaffirms the factors which are used to determine whether payments constitute tips or service charges. Q&A 1 of Revenue Ruling 2012-18 provides that the absence of any of the following factors creates a doubt as to whether a payment is a tip and indicates that the payment may be a service charge:

> - The payment must be made free from compulsion

> - The customer must have the unrestricted right to determine the amount

> - The payment should not be the subject of negotiation or dictated by employer policy; and

> - Generally, the customer has the right to determine who receives the payment.

https://www.irs.gov/businesses/small-businesses-self-employe...

So all of those restaurants with a mandatory top on large tables are breaking the law.

It's only illegal if they are reporting it to the IRS as tip revenue. Mandatory tips aren't tips, they are service charges and must be reported to the IRS that way.

They should also be labeled as such to customers.

Or the FTC. That's fraud - the advertised price isn't the actual price.

You could say "what about mandatory tipping on tables of 6 or more?" But in every case I've ever seen, it says so on the menu. That is, you're told what the deal is before you order. Whereas in this case, it sounds like the price was changed after you ordered, when you tried to pay.

> Generally, the customer has the right to determine who receives the payment.

Doesn't literally every POS machine violate this? I've never seen the screen ask whom my tip should go to.

> That is illegal.

Given that this is an IRS rule, it’s probably only illegal if the business reports the income as tip income to its employees, as opposed to a service fee charged by the business.

Then those charges should also be labeled as such to customers.

Interesting. Maybe I should report it.

Information on how to: https://www.irs.gov/individuals/how-do-you-report-suspected-....

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