Taxing thoughts on tips and the IRS
IT WAS ONE of those nights, the type of night where everything goes just right. All the food came out on time and all the drinks were perfectly balanced. It was about as perfect as any night in the restaurant business could be. Sure, I would love to take credit for the rightness of it all, but then I suppose I would also have to take the blame for all those nights where everything just goes wrong.
I handed the smartly attired business woman the check for her evening’s enjoyment. Perfect evenings often produce perfect endings. In my business, it is not so much about the journey but the destination that matters.
The lady had enjoyed her food, her drinks and dare I say it, her bartender as well. She had laughed at my jokes, made a few of her own, and together we had what could only be referred to as a “great time.” My expectation of a favorable reward for services rendered was a foregone conclusion.
In my industry, you are expected to take home at least 8 percent of your sales in tips. In fact, that is the starting point for the tax preparers. But sometimes people say, “Isn’t 15 percent a standard tip? What happens to the rest?”
People often assume that waiters or bartenders keep every cent they are given as a tip, which is typically not true. The busboys get a percentage, the maître d’ gets a percentage, maybe the hostesses and the wine steward get a cut, the dishwasher and sometimes even the cooks get some. If you are a bartender, you will usually have to split what is leftover with the other bartenders.
So out of that $10 you gave me, I might take home about $4. Mind you, I am not complaining, just explaining, because if anyone knows the equation, it’s me, and I have chosen to accept it for the past 25 years. Such is the nature of responsibility.
It is also true that if someone actually stiffs a waiter or bartender, not only does the bartender or server not make any money on the transaction, but they still have to pay all the other people, because those “tip outs” are based on sales, not tips. So it will actually cost them money to wait on that person. Double ouch, if you ask me.
I set down the check and smiled. The woman smiled back. Perfect, until “…
“Are you interested in buying a house” she asked.
“No, not really,” I said, noting not only my immediate surroundings — the restaurant job I hold — but also the ridiculously expensive suburban surroundings that in turn surround it.
“OK,” she said, thankfully making no further comment on my perceived earning potential. “Can you sign this?”
“What is it?”
“It’s an affidavit for the IRS saying that we spoke about business. That way I have a record of this dinner as a business expense.”
“I’m not going to sign that.”
Now I am used to people using their business credit cards for what can only be considered questionable business expenses: dates with the mistress or drink outings with the golfing buddies. But they have never asked me to sign anything. I figure that is their responsibility, or their blame if it comes to that.
The last thing anyone anywhere wants is a reason for the IRS to contact them. It’s intimidating, to say the least.
She looked at me for a long second and then signed the check, leaving the tip box blank. So much for perfect endings.
With tomorrow being April 15, tax day, I submit these taxing thoughts:
• I still have to pay taxes on at least 8 percent of her bill.
• Corkage fees (opening wine the customer brings) are a sales taxable item, according to the State of California, as are “cake cutting” and “banquet” fees.
• The excise tax on liquor is $2.15 for a 750-milliliter bottle of 80 proof and $2.70 for 100 proof. This means that lowering the proof of your whiskey, not only increases the saleable volume but simultaneously lowers the tax on it. Something I believe Maker’s Mark might be aware of.
• The federal government collects nearly $10 billion annually from excise taxes on distilled spirits, beer and wine.