Taxing a service charge?????????????

Did you pay tax on the 18% service charge?

Is this a common practice now?

the key is in the wording. if they say '18% GRATUITY' then they can't charge tax.

if they put 18% SERVICE CHARGE, then yes, they may tax the gratuity. most halls do it. it is very sucky!!

Gina,
It's against the law for them to tax the entire gratuity. hotels in NYC have figured a way to tax approx 5% of the total, but when I create proposals for our spaces we tax F&B not service. If you are seeing a hall do this you can certainly discuss it with them and/or report them.

Now.....if a venue is not calling it 'gratuity' rather 'service/administrative' fees (we all have our wording, then they have a little more leeway with what they can tax
HTH

If its called a gratuity it cannot be taxed. (becuase a gratuity is income for someone else and they will pay tax personally

a service charge can be taxed.

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Posted by JXNOscar

Gina,
It's against the law for them to tax the entire gratuity. hotels in NYC have figured a way to tax approx 5% of the total, but when I create proposals for our spaces we tax F&B not service.
HTH

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They are telling my bride that it's not a gratuity, it's a Service Charge.....ummmm, hello? YOU CANNOT TAX ANY SERVICE!!!!!!!!!!!!!!!!!11

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Posted by JXNOscar

Gina,
It's against the law for them to tax the entire gratuity. hotels in NYC have figured a way to tax approx 5% of the total, but when I create proposals for our spaces we tax F&B not service. If you are seeing a hall do this you can certainly discuss it with them and/or report them.

Now.....if a venue is not calling it 'gratuity' rather 'service/administrative' fees (we all have our wording, then they have a little more leeway with what they can tax
HTH

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this is true--BUT the legal loophope is that they don't call it a GRATUITY. they use the terminology as service charge and therefore can tax the entire thing. this has been issue that comes up a LOT on these boards---and in the end, the halls still tax the service charge!

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Posted by curliegirl

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Posted by JXNOscar

Gina,
It's against the law for them to tax the entire gratuity. hotels in NYC have figured a way to tax approx 5% of the total, but when I create proposals for our spaces we tax F&B not service.
HTH

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They are telling my bride that it's not a gratuity, it's a Service Charge.....ummmm, hello? YOU CANNOT TAX ANY SERVICE!!!!!!!!!!!!!!!!!11

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I honestly would fight back. The Carlyle tried to do this we me, and I was like 'um...I am in the business.' haha
Either you as the consultant or your client should interface with them. The other way not to deal with this is for the client to offer to pay the grautity portion of the total cost in cash. Then they cant tax it.

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Posted by MandG072909

Yup as much as it stinks I think it's the norm...my mom had fit when she found this out but I think that if you charge 18% on per person + tax it doesn't work out to be a huge amount different than tax on per person + 18%

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take $130 x 200 people +the 8.625% = 2242.5
take $130 x 200 people + 18%= 4680
add that together and it =32922.5

If you tax the 18% it =33326.15
That's a difference of $403.65

I don't know about you, but I can think of a lot of things I could do with 400 bucks!!!

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Posted by curliegirl

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Posted by MandG072909

Yup as much as it stinks I think it's the norm...my mom had fit when she found this out but I think that if you charge 18% on per person + tax it doesn't work out to be a huge amount different than tax on per person + 18%

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take $130 x 200 people +the 8.625% = 2242.5
take $130 x 200 people + 18%= 4680
add that together and it =32922.5

If you tax the 18% it =33326.15
That's a difference of $403.65

I don't know about you, but I can think of a lot of things I could do with 400 bucks!!!

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Totally!!!!!!!!!!!!

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Posted by JXNOscar

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Posted by curliegirl

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Posted by JXNOscar

Gina,
It's against the law for them to tax the entire gratuity. hotels in NYC have figured a way to tax approx 5% of the total, but when I create proposals for our spaces we tax F&B not service.
HTH

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They are telling my bride that it's not a gratuity, it's a Service Charge.....ummmm, hello? YOU CANNOT TAX ANY SERVICE!!!!!!!!!!!!!!!!!11

---

I honestly would fight back. The Carlyle tried to do this we me, and I was like 'um...I am in the business.' haha
Either you as the consultant or your client should interface with them. The other way not to deal with this is for the client to offer to pay the grautity portion of the total cost in cash. Then they cant tax it.

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Thanks Nance, I will speak to her later tonight

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Posted by CASJLL

I don't know how you fought back because my father had arguments pretty much with every hall we visited. They all said there is a tax on the service charge. You pay tax in a restaurant - you pay tax in a RH, same thing.

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but you dont pay tax on the tip you leave!

I'm being taxed on it too.

The service charge doesn't cover gratuities, those are separate. It covers things like salary for workers, wear and tear, etc.

I accidentally called it gratuity to my BM last month and she was quick to correct me that it was a service charge.