Leaving a negative tip

[Bippy_the_Beardless]

@Frelling Tralk

Generally, true. When I was a waitress back in college, we had our minimum pay rate ($2.15 per hour, IIRC) paid to us in a check once every two weeks. Out of that check came the taxes not only on the $2.15 per hour, but also on any tips that the restaurant knew about (meaning credit card tips, since cash ones aren’t reported to management). However, they also assumed that you made at least 8% tip on everything you sold, so if you got nothing but cash tips for the entire two weeks, they’d still tax you based on 8% of your total sales for that time period. I believe that’s an IRS thing because it applied to every restaurant and bar I ever worked.

Thanks for this. Does anyone know if the 8% IRS value for expected tips is still valid, or has it gone up since basic tip % has gone up?

Secondly what tax rate would be typical for a low payed server. IE what percentage of the 8% expected tip would be payed by the server as tax if they were in a tax bracket of a minimum wage earner?

Which gets to this question
on a $10.00 bill how much would a server be out of pocket if they were stiffed on the tip?

[Tim_T-Bonham.net]

@InvisibleWombat

Under what circumstances would they take 8%? I’ve run several business that accepted credit cards, and it’s never been higher than about 4%+25 cents per transaction (avg transaction of $10.00 makes it 6.5%). Currently, we’re paying about 2.4%+15 cents, depending on the card (Amex is higher).

The rates each business pays to process credit cards is set by an agreement with the credit card companies.

Things that affect the specific rate charged to a business are:

• Businesses with mostly small amount transactions (a coffee shop) pay a higher percentage than businesses with big transactions (like an appliance store).
• Businesses sending in mainly manual transactions (the old 3-part carbon forms) pay a higher percentage than computerized transactions. (Actually, most businesses are now computerized, and send in their credit trans that way. Some credit companies now charge a higher per-tran fee for any manual transactions.)
• Businesses in industries that have more frequent credit charge-backs (where the customer disputes the charge) pay a higher percentage than businesses in other industries. For example auto repair shops, wedding photographers, and online sellers pay more than grocery stores or gas stations.

The rate also can be negotiated; big chains like fast food restaurants & convenience stores/gas stations will often negotiate a deal for all of their stores, both company-owned and franchised ones. And Credit card companies will sometimes set lower rates when they are trying to gain some advantage. For example, when Discover Card was starting, they offered lower rates than VISA/MasterCard (still do, I think). And it’s common for credit companies to offer deals to new types of businesses just getting into accepting credit cards. They also make deals to keep competing credit cards out. Actual exclusive agreements run close to restraint-of-trade laws, but they offer volume discounts that work the same way (if over 75% of your credit card sales are VISA, at the end of the year you may get a ‘bonus’ from them).

[Gary_Robson]

@Lemur866

It will equal 8% when the bill is 6.25, and the fee is 4% plus .25.

Thanks, Lemur, but I really doubt that there are many restaurants out there where the average charge is only $6.25 (including the tip!). The 8% number just sounded very high.

@t-bonham@scc.net

Businesses sending in mainly manual transactions (the old 3-part carbon forms) pay a higher percentage than computerized transactions.

I forgot about that. I haven’t done manual credit card transactions (except for the odd book fair) in years. I had forgotten how much more they charged for those.

[jasonh300]

@Rube E. Tewesday

You didn’t understand me. He has to pay a percentage of what the restaurant charged. Say (simplifed) that the bar percentage and the kitchen percentage are both 1%. The bill’s $100. He has to come up with two bucks, even if he got stiffed.

Also, some restaurants withhold taxes from the hourly wage based on the sales. So with a $100 bill, they would assume a $15.00 tip and withhold taxes on that $15.00 from their paycheck.