An Aug. 28 U-T San Diego story reports that the California Board of Equalization is updating the tax code to ensure that sales taxes will be collected on "mandatory tips."
For those who don't know, mandatory tips are those automatic surcharges added to the check for large groups—usually six or more people—in restaurants and bars. The policy became common in the 1990s and was created to ensure that servers wouldn't get stiffed after working long and hard on large tables.
After changes to the state tax code go into effect next Jan. 1, employers will have to pay taxes on those tips because they will be considered a "service charge," and I just don't see owners continuing this practice. Lord knows I hope they don't.
Now, I know, as a former bartender who has a ton of bartender friends and family, I'm going to catch some grief for saying this, but I can't stand mandatory tipping. By their nature, gratuities are voluntary, and the whole concept of "mandatory," from a bartender's perspective, makes us look entitled—as if we are owed a gratuity regardless of our performance. From a customer's perspective, whenever I see this on my bill, all I can think is, Frig off, gold digger. I tip what I want, when I want.
Of course, my table-server counterparts mostly disagree. They think the demise of mandatory tips, also known as autograts, will hurt their income. But it won't. I was a server before autograts were invented, and I served long after. I can tell you that nothing really changed. Not in the big picture. No, the reason so many servers believe their income will suffer is because they tend to employ a flawed system of logic I call Waiter Math.
For instance, most service-industry types will tell you that one of the reasons autograts are needed is because if they get stiffed, they still have to pay taxes on tips they didn't receive. But this is not entirely true. For one, if the customer pays with cash, servers are required to report only what they're actually tipped, not what they should have been tipped. Now, if the customer pays with a credit card, it's true that an automatic percentage of the bill is taxed. So, yes, if they get stiffed on a $100 credit-card tab, they still have to pay taxes on a tip they never got.
But here's what they forget: The auto-tax on credit cards is 8 percent (less than half of the average tip of 20 percent). And the reason it's only 8 percent is that it accounts for those tables that stiff or under-tip—quite liberally actually. If you add up any given server's credit-card sales on any given night, the tips they earned—even with the stiffs—will almost always double (sometimes triple or quadruple) 8 percent. And let's be honest, not many servers out there are reporting all their cash tips, either. The IRS estimates that more than 60 percent of gratuities in the U.S. are unreported, so I find it hard to buy this "Woe is us" story about being unfairly taxed.
Here's another example of Waiter Math, also known as Woe is Me Math, from thebitchywaiter.com: "Say a 10-top has a bill of $200 and you have to tip out 4% to [the busboys, food runners and other support staff]. That means that you owe $8 before a tip has even been calculated... If the customer [stiffs] you will still owe $8 to the staff, meaning you just paid money to wait on someone."
Gold digga, please! A server doesn't owe tip-outs on tips he wasn't given. Servers are required to tip the support staff a certain percentage of their actual, tangible, deposit-in-the-bankable, real tips. In every establishment I've ever worked—and I've worked in about 10,000—the servers added up their earnings at the end of their shift and tipped out according to the staff's due percentage of those tips—not a percentage of some imaginary bounty they never made.
Yes, yes, I know what you're thinking. You're thinking, Well, Ed, you don't bartend anymore. It's easy for you to take this position.
I held this opinion even when I was bartending full-time. I remember my first encounter with an autograt. It was in a little tapas house in Manhattan (which is, reportedly, the city where mandatory tipping was born). I was aghast. "How can they get away with this?" I ranted to my equally irritated companions. "Tips are based on merit!"
A year later, when mandatory tipping reared its ugly head at the restaurant and bar where I was working at the time, I was embarrassed. And I vividly recall some of the servers bragging about how they were raking in double tips—which occurred when a table of unknowing customers would tip on top of the automatic tip. The whole thing just seemed tacky, and I wanted no part of it.
And, yes, it's true, there will be the occasional eight-top that stiffs. But it doesn't happen very often. And for every time it does happen, there's another table that over-tips the all-crap out of you.
The point is, don't be one of those servers who go through an entire shift worrying about how much Table X and Table Y did or didn't tip. Just do your job, do it well and look at your tips in the big picture—how much did you make that night, week or month even?
Because if you're gnashing your teeth over the tip on each ticket, trust me, you will become an awful, rotten, bitter server—and then see how often you get stiffed.
Write to email@example.com and firstname.lastname@example.org. Edwin Decker blogs at www.edwindecker.com. Follow him on Twitter @edwindecker or find him on Facebook.
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