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Are gratuities and service charges taxed?

April 26, 2017Charges gratuities service TAXED

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Are gratuities and service charges taxed?

1 Answer

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10 Posted

Gratuities and other service charges are not taxable when the charge is: (a) not used as a supplement or in lieu of wages, or for managerial bonuses; (b) the charge is paid to the service personnel providing the service for which the gratuity was charged; (c) the charge is separately stated on the occupant’s receipt or contract; (d) the charge is usual and customary; and (e) records must be maintained to substantiate the distribution of the gratuity. For more clarification please see TIR 2002-004.