Charging gratuity on taxes?

Not sure. But I know all of the at home businesses (Thirty One, Tastefully Simple, Avon, etc.) charge tax on the shipping. The consultants can't change it, it's just how it is.

Obviously it's a bigger difference for a wedding. We have a few vendors who included tip in their fee. Not sure if that is before or after tax. I think it's one of those things that you can't change, it's just odd.

It may be a state specific thing but I have never heard of being charged the gratuity on the tax...its always been the PRE-TAX amout

That is odd...our venue does not do that. I would also ask if the gratuity is going directly to the staff members who are assisting with your event. If not, it is truly just a fee to the venue, and I do not think that is fair or justified. But it kind of sounds like a tax on top of a tax. I would ask your other vendors in your area if this is common, and if not discuss about getting it change prior to signing your contract. Best of luck!

My venue didn't do that. Read your contract. It should specify in there. If it doesn't, I would argue it.

All it says in the contract is that there is a 15% automatic gratuity added, nothing about before of after taxes, I just assumed it would be based on actual services not mandatory taxes.

I think it is usually on the services not after tax. Different areas may have different norms though.

This is from Gratuities and Service Charges

Tax Bulletin ST-320 (TB-ST-320) Printer-Friendly Version (PDF)

Issue Date: February 23, 2012

This bulletin explains how state and local sales tax applies to gratuities and service charges.

For sales tax purposes, the term gratuity means money a customer gives a wait person, server, housekeeper, or other person as an expression of appreciation for service rendered, such as a tip at a restaurant or bar.

Voluntary gratuities that a customer leaves are not taxable.

Mandatory gratuities are different because they are automatically added onto the bill given to the customer. However, a mandatory gratuity is not taxable if all of these conditions are met:

•the charge is shown separately on the bill;

•the charge is identified as a gratuity; and

•the business gives the entire separately stated gratuity amount to its employees.

If any of these conditions is not met, the mandatory gratuity is taxable, along with the rest of the bill.

Gratuities and Service Charges

Tax Bulletin ST-320 (TB-ST-320) Printer-Friendly Version (PDF)

Issue Date: February 23, 2012

This bulletin explains how state and local sales tax applies to gratuities and service charges.

For sales tax purposes, the term gratuity means money a customer gives a wait person, server, housekeeper, or other person as an expression of appreciation for service rendered, such as a tip at a restaurant or bar.

Voluntary gratuities that a customer leaves are not taxable.

Mandatory gratuities are different because they are automatically added onto the bill given to the customer. However, a mandatory gratuity is not taxable if all of these conditions are met:

•the charge is shown separately on the bill;

•the charge is identified as a gratuity; and

•the business gives the entire separately stated gratuity amount to its employees.

If any of these conditions is not met, the mandatory gratuity is taxable, along with the rest of the bill.

So are they adding the gratuity then taxing you, or are they taxing you and then adding gratuity?

That is way out of order and I would not sign a contract that had it listed that way. Gratuity should be based on service and cost of the items. Sales tax is a tax paid to the state and county based on the costs of the service/item. They are separate, at least here.

@Val they are adding the taxes and then the gratuity so they add an extra 15% of the tax charge as added gratuity.

I know that we have 18% added on top of the local tax, but the way I was under the impression is say our total bill is 5,000 then we would have 8.75% tax from that then 18% gratuity tax from the $5,000 then both added to the total bill so

$5.000 * 8.75% =437.50

5,000 * 18% = 900

5,000+437.50+900 = 7237.50

This is how it was explained to me, but like others said different area may have different regulations.

I work in a restaurant and Gratuity is always added after taxes. I assume it's the same anywhere gratuity needs to be added.

I don't think it really matters if they add the gratuity first you are going to pay the taxes on the gratuity, if they total it out and charge you on gratuity on the entire bill you are going to be paying the gratuity of the taxes either way the total will end up being the same. The only time thy cant tax you is if the "gratuity" is actually a voluntary tip. In this case it isn't it is an itemized charge on the invoice.

Typo

Emily, check with your local sales tax office. This is something that can vary by state and even by county.