New York-Long Island

Sales Tax on service charge

A question for those of you who have a contract with a caterer in NY State:  Are you being charged sales tax on the service/gratuity charge.

 I have finallyfound the perfect venue, which, of course, costs much more than I had planned.  They are charging a 20% "service" charge and NY State sales tax on the total price of per plate plus service.  I contacted NY State department of taxation and finance.  Tax law says tax does not apply if 1. the charge is separately stated on the bill.  2. if is specifically designated as a gratuity and 3. all the monies are paid over in total to the employees.  The caterer is stating the charge separately and swears all the money is going to the employees; but they are adamant about calling it a "service" charge rather than a "gratuity" and charging me sales tax.  So if anyone has a caterer who is not doing this, please send me the specifics as I would like to challenge this. 

Re: Sales Tax on service charge

  • alithebridealithebride member
    Ninth Anniversary 2500 Comments 25 Love Its Name Dropper
    edited December 2011
    i dont recall really but you have the tax law in front of you. if it's truly a gratuity it should be shown that way on the bill otherwise they're in violation. i'd tel them either fix it or you'll go elsewhere.


  • edited December 2011
    My venue charges a service charge (20% as well) and then a NYS sales tax, which I believe this was the same as most vendors I looked at before booking.  I think this is pretty standard.
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  • MollyMcneillMollyMcneill member
    edited December 2011
    It is standard and I doubt you would be able to get out of it.

    While a service charge does go to pay waitstaff, bartenders ect it should not be considered solely a gratuity.  If the restaurant calls it is gratuity by law they have to pay the employees all of that money.  Whereas if they call it a service charge they pay their waitstaff and can use the rest for administrative overhead. 

    For a restaurant or venue this makes more sense than calling a gratuity because say you had 100 people at your wedding and the venue's base price was 100 dollars per person but you added on a whole bunch of stations and upgrades on linens and china and suddenly it is now 300 per person, that has nothing to do with the waitstaff, why should they get the extra money?  The waitstaff would be entitled by law to get the money if it was labelled as a gratuity but not if it is considered a service charge.

    So for your 100 person wedding at 100 dollars per person that would be 10 waiters or so and the gratuity would be 2000.

    Whereas the 100 person dinner at 300 dollars per person because of linen and china upgrades would be 30,000 which would be a 6,000 gratuity for the same 10 waitstaff.  From a business perspecive the venue would lose a significant amount of money.

    I tried to negotiate this too but no luck and my wedding planner explained to me why this happened.
  • edited December 2011
    I was charged sales tax and gratuity as well...stinks b/c it's then atleast a few thousand on top of venue cost:( i'm in fla (broward cty)and our sales tax is 6% - new york's like 8. something...i guess it's more to budget for but like the other girl's said it's standard unfortunately:(
  • kisavalkisaval member
    First Comment
    edited December 2011
    Thank you all for your input.
  • smsuziesmsuzie member
    edited December 2011
    LOL I HATE service charges!  My venue is 23% and they WANT a tip- they even give you a list of what is expected.  Its ridiculous.  I wish the government would get invovled in this stuff.
  • Sales tax varies in every country. In United States, many states are beginning to crack down on businesses that use the "tax zapper" programs to keep 2 sets of books by basically inserting a flash drive into the cash register. States say the software programs costs them billions of dollars in unreported taxes. Same as:States cracking down on tax zapper programs
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