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Hawaii state law to automatic gratuities are taxed? Hotel…

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Hawaii state law to...

Hawaii state law to automatic gratuities are taxed?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Hotel restaurant does a automatic 15 percent gratuity for parties of 6 or more, and the guest pays a tax on the gratuity as well, should this be the case?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

No, I was just told that it is the Hawaii state law

Submitted: 8 months ago.Category: Tax
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11/24/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 8 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Tax Professional: Tax.appeal.168, Tax Accountant replied 8 months ago

The amount that the restaurant is charges for large parties is referred to as a mandatory service charge. This is allowed and based on the following information, this charge does not go to the employees in all cases. SEE BELOW:

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Some restaurants tack a “mandatory service charge” on to bills for large tables of diners, private parties, or catered events. Under federal law and in most states, this isn't considered a tip. Even if the customer thinks that money is going to you and doesn't leave anything extra on the table, your employer can keep any money designated as a "service charge." The law generally considers this part of the contract between the patron and the establishment, not a voluntary acknowledgment of good service by an employee. Many employers give at least part of these service charges to employees, but that's the employer's choice: Employees have no legal right to that money.

A couple of states have different rules, intended to make sure that customers know whether their money is going to the employer or the server. Hawaii is one of them: Hawaii employers that use mandatory service charges for the sale of food or beverages must either pay that money to employees as tip income or clearly disclose to the customer that the service charge will be used for expenses and costs other than employee tips and wages.

REFERENCE SOURCE:

https://www.nolo.com/legal-encyclopedia/hawaii-laws-tipped-employees.html

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Hawaii does not impose a sales tax, instead, they impose a general excise tax (referred to as the G.E.T.). This is likely what they are charging. SEE BELOW:

Unlike many states, Hawaii does not have a state sales tax. Instead, Hawaii has a general excise tax. As excellently explained in an article by Hawaii Civil Beat, "The General Excise Tax (GET) is levied against a business's gross receipts for the privilege of doing business in Hawaii. The majority of business activities are subject to a 4 percent tax.

REFERENCE SOURCE:

https://www.tripsavvy.com/additional-taxes-fees-when-traveling-to-hawaii-1533988

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