Tax on a service charge?

jilybeans4 · September 2009

My venue charges a 22% service charge, and we are taxed on that plus our regular bill. Is this normal? I was thinking the service charge is a "tip" and the actual bill would be what we are taxed on.They also charge a service charge for our decor - such as, we have some table runners and lighting for $227, and there is a $50 service charge. Normal?

*BeachBride0410* · September 2009

That is how our contract is. Ceremony, 21%....reception(food & bar), 21%. I just looked and there is no tax on our service charge. That is very odd, I would question that.

jaramler · September 2009

That's the case for my reception venue. Tax on service charge, and a service charge on anything they provide or do for you. Unfortunately.

lyndausvi · September 2009

It really depends where you live. We do not have tax here, but in general 'service charge' is code word for part tip, part goes to the bottom line for the company. Some states realize that and want a cut of the profit. If it said 'gratuity' then 100% of that amont would have to go to the servers, thus it would not be subject to tax.

jaramler · September 2009

Maybe it depends on each state's tax laws?

ring_pop · September 2009

We have 2 taxes here, the PST (provincial sales tax) and GST (goods & services tax, which is federal). I'd have to double check this, I believe that they charged PST pre-gratuities but GST post-gratuities because it's called the "goods and services" tax. Either way, we were taxed on service charges. Stupid government.

betrothed123 · September 2009

We were taxed on service charges, but gratituity was a completely different line on our invoice and we weren't taxed on that.

jilybeans4 · September 2009

Hmm, I just looked at our contract again and it DOES say that there is tax on the service charge. That line is buried in the middle of a bunch of other fine print, but I guess it is there. Guess it pays to read your contract ahead of time. *sigh*. One nice thing about this wedding being over soon - I won't continually be shocked at how much everything costs and how everything ends up being more expensive than I ever imagined!

shannonalise · September 2009

In our research for caterers, we found that every caterer does this. We asked about it a while back and it was explained to us - actually completely made sense at the time, but I can't remember what the validation was. Either way, you can't get around it - can't haggle that out. You can haggle the price in many cases, but you can't get them NOT to tax the service charge, even if it seems bass ackwards.

sucrets4 · September 2009

Our service charge was explained to us as being the pay for the wait staff and other people, so yes, it was taxed. Gratuity was different and at our discretion, although they recommended an amount.

tlv204 · September 2009

Our service charge and gratuity charge were the same thing, and I don't think we were taxed on it, because we had to give that part to them in cash. We did pay a separate service charge too for them setting up our centerpieces though (since we weren't using theirs and the florist didn't do it). I think it was $5 per table.

Tax on a service charge?

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