RH TAX/SERVICE CHARGE Q

So I am looking at the bill for our final bill with our RH and they tally everything up, figure out the 20% service charge (thats fine) but then they charge us TAX on everything INCLUDING that service charge amount which is like an extra 200 bucks! Is that normal???

I figured you would: total up the plates and things, total up the tax, total up the service and add it all together.

Is this normal??!! Please set my mind at ease before I make a check out.
THANKS!!

I didn't think services, in general, were taxable.

if it is called a service charge they can tax it, but if it called a gratuity they can not.
*It usually is frowned open either way but most halls do it that way, as it is added income that they are charged tax by the state on.

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Posted by Lsorrent

Most halls tax the service charge. That's why it's called a service charge and not gratuity.

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yup

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Posted by JLWSJC

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Posted by Lsorrent

Most halls tax the service charge. That's why it's called a service charge and not gratuity.

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yup

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It really doesnt matter either way. It comes out to the same total whether you do tax before the 20% or after. just did it the opposite of hall and it came to same price.. Hopefully that will help set your mind at ease a bit

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Posted by Lsorrent

Most halls tax the service charge. That's why it's called a service charge and not gratuity.

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this... those sneaky bishes lol

it is not the same price before and after tax.
i gave my rh a peice of my mind when i booked and found that out but apparently they can get away with it if they call it a service charge..
its bs but i wont let a few hundred stop me from booking the place i love.

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Posted by FutureJOC

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Posted by Lsorrent

Most halls tax the service charge. That's why it's called a service charge and not gratuity.

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this... those sneaky bishes lol

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Unfortunately it is not the RH who are the bad guys here. It is NYS! They came down hard on the RHs a while back and made it taxable. That $$ goes to the state not the RH.
(I'm a tax accountant)

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Posted by Lsorrent

Most halls tax the service charge. That's why it's called a service charge and not gratuity.

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This. Unfortunately!

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Posted by IrishAli

No it doesn't. If your total RH bill is $10,000 and you add the service charge and then tax it all, you get a total of $13,050. If you tax the original total of $10,000 and then add the 20 % you get a total of $12,875. It doesn't make much of a difference, but there is a difference. Especially if you RH bill is high- it could be a difference of more than a few hundred dollars.

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I'm so sorry. you're right. I sat here figuring it out and figuring it out and even had FH figuring it out. And he too said I wasnt getting it right. I said how? after us going over it, he showed me that I was totally screwing it up. I was taking the total and adding 20% then taxing that combined total. I then tried it the other way. I took total and added tax, then added 20% to that combined total. By doing that, that is how I got the same total both ways. This is all new to me and didnt realize it didnt go like that. SORRY GIRLS

Here is a copy of the NYS Law on Gratuities and Service Charges. I hope this helps. I could not find any law listed after Ausust 2009.

New York State Department of Taxation and Finance Office of Tax Policy Analysis Taxpayer Guidance Division

TSB-M-09(13)S
Sales TaxAugust 4, 2009

Sales Tax on Gratuities and Service Charges
This memorandum explains the existing Tax Department policy on applying state and local sales taxes (sales tax) to gratuities and service charges.

General

Section 1105(d) of the Tax Law imposes sales tax on the receipts, including any cover, minimum, entertainment, or other charge, from every sale of beer, wine, or other alcoholic beverages and food or drink of any nature sold in or by restaurants, taverns, or other establishments or by caterers. Therefore, as a rule, the total charges by such establishments from the sale of food and drink, including gratuities and/or service charges, are subject to sales tax under section 1105(d).

However, section 527.8(l) of the Sales Tax Regulations contains an exception to this rule:

Gratuities and service charges. Any charge, made to a customer, is taxable as a receipt from the sale of food or drink unless:

(1)
the charge is separately stated on the bill or invoice given to the customer;
(2)
the charge is specifically designated as a gratuity; and
(3)
all such monies received are paid over in total to employees.

Based on the law and regulations, the department has established the following policy on the taxation of voluntary and mandatory gratuities and service charges.

Voluntary gratuities

When a customer chooses to leave a gratuity for a waitperson, it is considered a voluntary gratuity. In some cases, the waitperson keeps all the voluntary gratuities that he or she receives. In other cases, the establishment gathers all of the voluntary gratuities and divides them among the wait staff, the kitchen staff, and the host or hostess (the employees). Occasionally, an establishment may keep part of the gratuities. Since the gratuities are voluntary, they do not constitute a charge by the establishment and are not subject to sales tax.

Mandatory gratuities

Establishments may charge a mandatory gratuity in certain situations.

For example, some establishments add a gratuity of 20% to all checks for groups of six or more. Since the gratuity charge is made by the establishment, the gratuity is subject to sales tax unless all three of the conditions in regulation section 527.8(l) are met. Accordingly, if an establishment separately states the gratuity charge on the check (or other invoice) given to a customer, specifically
W A Harriman Campus, Albany NY 12227 www.nystax.gov
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TSB-M-09(13)S Sales Tax August 4, 2009
designates the charge as a gratuity, and gives 100% of the gratuity collected to the employees, the gratuity is not subject to sales tax.
In some cases, an establishment may use part of an employee’s gratuities to pay part of the employee’s tax liability (for example, withholding tax or the employee’s portion of social security) and give the remainder of the gratuities to the employee. Since the end result of this situation is that 100% of the gratuities are, in effect, turned over to the employee, the gratuities charge is not subject to sales tax. However, if the establishment keeps any part of the gratuities or uses any part of the gratuities to pay its own liabilities, such as the employee’s wages or the employer’s portion of social security, the entire gratuities charge is subject to sales tax.