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Last Updated: 3/22/2017

Sales – Tips and Other Service or Rental Charges

Voluntary tips

Tips that a customer voluntarily leaves or adds to a credit card receipt are not taxable.

Tips and service charges added by seller

Tips or service charges a seller adds to the bill are taxable, even if the tip amount is given to employees. The table below shows which taxes apply.

Tips or service charges for these items:

Are subject to these taxes:

Food only

  • 6.875% state general rate sales tax
  • Any applicable local and special local taxes

Liquor only

  • 6.875% state general rate sales tax
  • 2.5% liquor gross  receipts tax
  • Any applicable local and special local taxes

Food and liquor combined (see note below)

  • 6.875% state general rate sales tax
  • 2.5% liquor gross  receipts tax
  • Any applicable local and special local taxes

Note: If you can divide the tip or service charge to show what portion is for food versus liquor, do not collect the 2.5% liquor tax on the food portion. You must keep documentation showing how you determined the tax.

Other service and rental charges

Service and rental charges or fees may be taxable. The table below lists specific examples.

Taxable charges

Nontaxable charges

 
  • Cover charges (for food, drinks, entertainment, dancing, admission, etc.)
  • Delivery charges
  • Equipment rentals (decorations, tables, chairs, audiovisual equipment, etc.)
  • Parking fees for customers or employees (see Fact Sheet 166, Parking Services)
  • Coat check fees
  • Corkage fees
  • Returnable container fees (pie tin, or other reusable food or beverage container)
  • Space rental (meeting room, ballrooms, halls that are not in a recreational area or for lodging)
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