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Kokua Line

By June Watanabe

Friday, October 27, 2000

How to pay
taxes on those
$20 drinks

Question: Will you clarify a question for me and many other cocktail waitresses? I am a cocktail waitress at a hostess bar. I am not paid an hourly wage. I only get paid when a customer buys a drink for me of which I get a portion ($14 out of a $20 drink). Do you report the money earned as tips? Aren't tips the extra money that you earn if you are paid an hourly wage?

If it is considered tips, how much do we report and how often do we report? Or is the money earned on drinks considered commission income? If it is considered as commission, do I have to file a self-employment tax form? I have received conflicting information on this matter that I would like to clear up.

Answer: It depends on whether you are paid as an employee -- in which case taxes are supposed to be withheld from your paycheck and a statement is to be provided with that check -- or whether you are an independent contractor -- in which case no taxes are withheld and no statement is provided.

From what you've stated, it appears you are being paid commission income as an independent contractor because you are paid a specific amount on the price of each drink sold, said Linda Cacpal, spokeswoman for the state Department of Taxation.

If that's the case, you are considered an independent contractor. That means you are personally responsible for paying the state's 4 percent general excise tax on the commission income, although tips are not subject to the GET. Additionally, you would be responsible for paying estimated taxes to the federal government as well as the state on that income, Cacpal said.

If you are being paid as an employee, any wages earned would be subject to withholding of state and federal income taxes, as well as Social Security (FICA) taxes.

"Any additional amounts received from customers as tips should be reported to employers for their payroll records and for withholding of taxes on these amounts," Cacpal said. Tips are considered "those additional amounts that the customers choose to give to the waitresses freely and willingly without any obligation."

Q: What is the legal height of hedges in residential areas?

A: There is no height limit on hedges. The only restrictions are that they cannot encroach on public sidewalks and that they not obstruct traffic. In the former case, you should call the city's housing code section, 527-6308; in the latter, call police at 911, saying it's a non-emergency.


To the two ladies who found my car key in Kahala Mall. They left it with the security office. Many, many thanks. May you have good luck and good health for years to come. -- No Name


Pedestrians, please don't walk on the streets. One morning, as I was headed for the H-1 near the Hawaiian Humane Society, a man was walking on the street with his back to traffic. I tried to skirt him, but he suddenly walked toward my car. I stopped and he waved to me that he was OK. But I was really worried about him. I notice people in Kaimuki and Kapahulu have a tendency to walk on the street even when there is a sidewalk.-- Helen


To the Salvador Nieto family, who has shown so much kindness to our beloved Jennifer at Valley of the Temples. Our family truly appreciates your thoughtfulness. -- The Carvalho Family

Need help with problems? Call Kokua Line at 525-8686,
fax 525-6711, or write to P.O. Box 3080, Honolulu 96802.
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