Tipping with Cash or Credit?

[bobmac]

The "cash only" thread got me thinking about this. Many years ago, it used to be thought of as proper and considerate of the waitstaff, to tip with cash, even if you were paying with a credit card. Any thoughts on this?

[Paris M]

I try to always tip with cash but I am not always flush with greenbacks. I figure better a good tip from a CC than a lousy one with cash.

[emhahn]

Tip with CASH! As much as possible!

Waitresses and Waiters have to pay taxes on credit card tips......

Eric

RestaurantEdge.com

[emmapeel]

Tip with CASH! As much as possible!

Waitresses and Waiters have to pay taxes on credit card tips......

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I have to pay taxes on my earnings too... I used to tip with cash often, but after a statement like that, I'll have to charge my tips from now on!

Edited April 25, 2005 by emmapeel (log)

[glenn]

I have to pay taxes on my earnings too...  I used to tip with cash often, but after a statement like that, I'll have to charge my tips from now on!

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I hear ya and I don't disagree. But getting back to the credit cards vs. cash thread, some restaurants charge the servers the credit card discount fee on credit card tips. Also, some restaurants don't pay out credit card tips immediately - some places include it in the paycheck making the server "wait" a week or more before they get the tips. One reason people become servers is because of the instant cash.

[Pan]

My understanding is that wait staff have to pay taxes on the basis that they make 15% in tips per transaction, anyway, so if you pay them in cash, at most, it's possible that they're safely getting away with paying taxes on only a portion of the tip. But then again, consider the jerks who are stiffing or undertipping them. They have to pay taxes based on being tipped 15% in those cases, too. Would anyone please correct me if I'm wrong in any respect?

[CtznCane]

I think cash tips are better for a couple of reasons. If it is a place you do, or want to frequent regularly you can make more of an impact (especially with a larger percentage tip) on your waiter which over time will help your service.

Another, though less desirable reason is that on a couple of occasions recently I've encountered a situation when the credit card bill comes out being 1-2 dollars more. 1 to 2 dollars more than the total I have on my receipt after adding in the tip. With such a small differential it usually slips by unnoticed and it is small enough to not want to make an issue over. In fact the time alone to do so makes it undesirable. Tip with cash and it becomes a non-issue.

[glenn]

My understanding is that wait staff have to pay taxes on the basis that they make 15% in tips per transaction, anyway, so if you pay them in cash, at most, it's possible that they're safely getting away with paying taxes on only a portion of the tip. But then again, consider the jerks who are stiffing or undertipping them. They have to pay taxes based on being tipped 15% in those cases, too. Would anyone please correct me if I'm wrong in any respect?

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Many restaurants have entered into a reciprocal agreement with the IRS to report all of the tips, but other than that, there is no rule that waiters have to declare a certain percentage of sales as tips. Some (many?) restaurants implement such a policy, but the legality of it is questionable. [the employer is in a precarious situation - damned if they do and damned if they don't - on the one hand, IRS can penalize the restaurant (and employee) if they find not enough tips are being reported and on the other, the restaurant is not allowed to declare an arbitrary amount of tips - like 15% of sales - for the server.]

[TheFoodTutor]

My understanding is that wait staff have to pay taxes on the basis that they make 15% in tips per transaction, anyway, so if you pay them in cash, at most, it's possible that they're safely getting away with paying taxes on only a portion of the tip. But then again, consider the jerks who are stiffing or undertipping them. They have to pay taxes based on being tipped 15% in those cases, too. Would anyone please correct me if I'm wrong in any respect?

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At the more casual place where I work, I print out my financial checkout at the end of each day, and at the bottom of the slip, the computer calculates several things for me: It tells me how much I received in credit card tips, dollar-wise, what percentage my credit card tips were with regard to my credit card sales (but it leaves off any zero credit card tips, assuming that I received a tip in cash), and what percentage my credit card tips were in relation to my total sales. This last number tells me a vital piece of information. If I don't claim any cash tips at all, this will be the percentage of tips that the government will see, and that will be the basis they use to decide whether it's worth auditing me.

So at that point, it is up to my discretion to count all the tips I received in cash, subtract my tipshare (the amount I pay out) from that amount, and determine the amount to declare in cash tips. My employer informs me that, while I am required by law to declare all my cash tips, the amount generally perceived to be the lowest one can declare without being audited is around 10% of my total sales, because the government is aware that sometimes servers do get stiffed, and not everyone tips the same percentage.

I have also been informed that being audited, as a server, is about as pleasant as having a root canal without anesthetic.

Edited April 26, 2005 by TheFoodTutor (log)

[bavila]

Aha -- who can resist the urge to evade taxes? Very few of us, I'm afraid. I, too, reported as little as I thought I could when I waited tables, so I count myself in this number.

That said, I do try to tip in cash because some servers are charged for the CC fee.

[TheFoodTutor]

Aha -- who can resist the urge to evade taxes?  Very few of us, I'm afraid.  I, too, reported as little as I thought I could when I waited tables, so I count myself in this number.

It's important to note that I am not saying that I evade taxes. I'm just clarifying what the guidelines are. How to declare income whether one gets stiffed or not is a valid question, and people outside the industry don't always know how it works.

Actually, there are some days that I declare more money than I actually make, because if all of my tips are on credit cards, they'll all be declared, so I have to remember to claim negative money in tipshare when I clock out. Lots of times I forget to do that. Usually Mondays. Everybody pays with credit cards on Mondays, because they spent all their cash over the weekend.

[djbeers]

I try to tip in cash, but on those occasions when the bill gets up there and my wallet cash won't handle a good tip, I go with putting the tip on the credit card. However, I try to make up for it by increasing the tip amount on the credit card. Probably another 5% or so extra, on average.

[bottomlesspit]

I am a points monger and almost always charge everything, including tip. While some people, by experience or hearsay, are privy to such information as servers being charged some kind of fee on credit card transactions, I don't think that should be a customer's concern.

Edited April 27, 2005 by bottomlesspit (log)

[emhahn]

Credit cards are bad for restaurants, PERIOD!

The operator has to pay all kinds of fees, etc., just to be able to use the network, which they usually do not pass on to consumers. However, since prime rates just went up on all credit card accounts, this may change.

Some operators pass this cost along to their waitstaff, which is bad. Waitpersons usually make about $3 an hour, and to have to pay for part of their tips, after they've just earned them, only hurts their income further.

Eric

RestaurantEdge.com

[Mayhaw Man]

Alrighty Then.

There is a danger that this topic, which is totally valid, is about to turn into an extension of the other discussion going on concerning cash and credit cards. This topic is about tipping and how and why you choose to use one type of payment or the other-NOT the benefits of credit over cash or cash over credit. Also, I would ask you to be very careful when making charges about the tax paying habits of servers (unless you are telling a story about yourself), as generalizations are generally for people who generalize, generally. Specifics only.

Please do not turn this into a financial debate, as clearly that is more of an argument for "endlessroundandroundarguments.com" and not for a food related organization such as the one that you are using now.

Thanks in advance for your cooperation. You people are the greatest!

[therese]

I use credit cards for just about everything, including tipping in restaurants. I do like the points I earn (and put to good use) but I also like the convenience.

In my case a restaurant's decision to accept credit cards is an excellent one, as I am otherwise unlikely to go there. Period. Yes, the restaurant (and all other retailers) must pay to offer this convenience, but they also pay for lots of other things in overhead. It's the cost of doing business, and if you want mine you'll accept credit cards.

[lancastermike]

When I made my living tending bar I wanted cash, cash and more cash. Credit card tips were only paid out to servers on paychecks. I always tip cash, unless I just do not have enough. If i tip, I want ther server to get it. I was in the business long enough to know that some managment simply cannot be trusted to pay the employees. Unlike some of my co-workers I kept record of everything that was mine. Others did not and had no backup when things got messed up. Tip cash if you can.

[WHT]

I am a points monger and almost always charge everything, including tip.  While some people, by experience or hearsay, are privy to such information as servers being charged some kind of fee on credit card transactions, I don't think that should be a customer's concern.

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While I agree in principal with you, here is another way of looking at it. You tip 20% on your Amex card if the sever is hit for the credit card fee you have not tipped 20%. Better to tip in cash.

[bilrus]

I tip in cash if I am paying my bill with cash.

I tip with a credit card if I am paying my bill with a credit card.

Pretty simple strategy.

[Chris Amirault]

I tip in cash if I am paying my bill with cash.

I tip with a credit card if I am paying my bill with a credit card.

Pretty simple strategy.

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Like he said.

[emmapeel]

... I was in the business long enough to know that some managment simply cannot be trusted to pay the employees.  Unlike some of my co-workers I kept record of everything that was mine.  Others did not and had no backup when things got messed up.  ...

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This is a sad state for servers and I sympathize. However, I cannot be concerned about the relationship servers have with their employers. I feel, as you have done by keeping a record, that servers owe it to themselves to take care of this issue. Furthermore, this is the same reason I would not want to move to an auto-service charge, because I'm sure most Restaurateurs would take advantage of it. Some people feel that the restaurant should add the service into the price of the meal. In that case, servers should get, let's say for argument sake, 15% of the check. I am afraid that they would wind up with 10-12%, with the restaurant explaining that the meal cost went up that week. Then the server is not getting 20%, they are paying cc fees, and payment is delayed. I would rather stay in control of the tip as a diner. Regardless, if I pay cash, I'll tip in cash. If I charge it, I'll charge the tip.

[pam claughton]

I've never heard of restaurants charging waiters the credit card fees! This is awful, and I suspect, illegal.

[rjwong]

As for me, I always tip in cash. And I make certain my server gets the receipt folder or tray (containing the tip) in hand with a spoken comment from me, "I want to make sure you get this. Thank you." The only times I tip with a credit card is when I'm really strapped for cash or the service is rather perfunctory.

[glenn]

I've never heard of restaurants charging waiters the credit card fees!  This is awful, and I suspect, illegal.

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Why?

[Keitha]

I've never heard of restaurants charging waiters the credit card fees!  This is awful, and I suspect, illegal.

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Why?

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I've asked this question to various people "in the know" and I could find no agreement. Some thought it was illegal and some just thought it was immoral.

I started asking when I was a server who had a percentage taken off my cc tips. The owner felt justified and most of the servers had no idea it was wrong.

That was the last place I ever worked where tips were deducted this way, but it was not the only place where I worked where the owners were less than honest.

That said, I generally ask the server if they'll get the tip right away on the cc and if they'll get all of the tip. If they do, I'll leave it on my card. If not, I'll usually pay cash. :)