IRS, Auto Gratuities (Part 2) and The Underlying Problem with Tipping

Wow! I never imagined my last blog post regarding the IRS taxing auto gratuities would get so much attention. The discussions in the comments were colorful to say the least and a lot of arguments were made. It is quite clear that there are some problems in the industry regarding how hospitality staff are compensated.

Before we get into it, I want to make an apology. I must admit my original blog post title wasn't clear and may have led some to believe that establishments can no longer charge auto gratuities. The truth is that they still can as long as they withhold these from the staff and tax them like regular wages. However, due to the ruling many restaurants (like the Olive Garden for instance) have done away with auto gratuities. It's confusing so you can read more about this IRS ruling here: Rev. Ruling 2012-18

Now, here are some common thoughts regarding the industry and the history and role of tipping...

Many individuals argued due to the low minimum wage many states can legally pay servers (as low as $2) that they need the tips to survive. I agree that many of you count on those tips and if you don't receive them, you go without.

However, the nature of a tip and its history has always been about an optional variable amount based on the service given. The history of tipping should not be ignored here.

As some have stated, the responsibility lies on the employer to compensate their staff fairly and it is unfair to take this frustration out on the customer. Fair point.

What is frustrating when it comes to customers? When you give great service and get little to no tip... This can really affect you and may be the reason some people have placed the blame on the customer. Many customers don't think a tip is deserved, no matter how good the service is.

Someone posted, "A tip is not mandatory, however if decent or better service is given, I should receive a proper tip. It is defeating when I put a lot of effort in and that exceptional service is not appreciated." 

That is a fair and reasonable statement. That is a statement I think it would be hard for others to argue.

So in the end, do I think a tip should be mandatory? 

No I do not, but if fair or better service is given then yes, some level of compensation definitely should be strongly considered and hopefully, the customer will recognize the extra effort and/or excellence of the server and reward them for it.

Want to increase your odds of getting tipped? Find ways to become an exceptional server.

To Tip or Not To Tip? This choice should be totally left up to the individual customer.

Don't agree with me? Let's hear your thoughts... What do you think a tip for "fair" service should be?

Thanks for reading!

Scott Young

Founder of
www.ExtremeBartending.Com (20 Years, Creator of 25 Bar Tender DVD's, Flair classes At Your Bar )
www.MixedDrinkRecipes.Net  ( Over 17,000 Free Drink Recipes)