We had a buffet banquet at the Pacific Beach Hotel for 400 people and were served by 16 people. We were charged $22 per person, plus a mandatory 15 percent tip, PLUS the state general excise tax (GET) on the total bill. That's almost 20 percent. To me, that's like double taxation. I thought tips were supposed to be based on service? This was a buffet, not table service, but I figure we paid more than $1,300 in tips (and extra tax). I heard more restaurants are starting to charge a mandatory tip and tax the tip. Is this allowed? Hotels, restaurants
may mandate gratuity, taxThere are two parts to your complaint and, in both cases, the hotel was within its legal right to pass on the charges.
"When we book people, we tell them up front" about the mandatory tip, which the hotel has followed for years, said Pacific Beach attorney Kery Kamita. "We do it just to ensure our employees receive a gratuity. As far as taxing, "We're just a conduit. We don't receive any of that money."
Customers are told in advance what the total cost per person, including tip and tax, will be, Kamita said.
Although a customer generally would determine the amount of a tip or gratuity, it is a growing practice for hotels/restaurants to set a mandatory percentage, especially for groups of diners.
But, says the state Office of Consumer Protection, you must be told ahead of time that such a tip will be part of your bill.
As far as the tax, gross receipts refer to all mandatory charges, including tips, said state Department of Taxation spokeswoman June Yamamoto. The key word is mandatory, since tips given directly to an employee - in cash or added to a bill and turned over in full to the employee - are exempt from the GET, she said.
Whether the seller wants to pass on the GET on the mandatory tip is up to the seller. But the seller should inform the buyer up front about the total charge.
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