Too expensive to eat out anymore?

[disneysteve]

If you actually look at your final bill you can check to see if they added the tip into the bill. I'll bet you it happens 5 out of 10 times...that's cash out of your pocket!

Many restaurants automatically add a tip for large parties, but I have never seen the tip amount taxed.

[willowstudios]

It just happened to us at the Weathervane in NH - they put the tip into the bill, so we were going to be taxed on our tip.

[Ima saver]

I have never seen that either. I do agree with tips added on for larger parties. Our restaurant never did that. I would run my legs off for a big group and get very small tips.
My first big table of 18, i will never forget. It was a church group and they left me a total of 87 cents.
We had a large bus group come in for lunch. I think they thought the tip was included. I got the entire group and made nothing. No tip at all.

[disneysteve]

It just happened to us at the Weathervane in NH - they put the tip into the bill, so we were going to be taxed on our tip.

We're on vacation in NH right now. I think we drove past the Weathervane.

[Joan.of.the.Arch]

What I have seen though is tax applied to the cost of the meal before the coupon was applied. So I get taxed on a $20 meal that cost me only $10 after coupon.

Here, I think it is probably state law that we pay tax on the value of the coupon we are using. So I would expect to pay tax on the whole $20 worth of meal, even if I got it for $10. Same thing for coupons used in retail stores.

[safari]

Here, I think it is probably state law that we pay tax on the value of the coupon we are using. So I would expect to pay tax on the whole $20 worth of meal, even if I got it for $10. Same thing for coupons used in retail stores.

That's correct. Basically, using a coupon simply means that somebody else is paying part of the cost, but you're still responsible for paying the tax on the original amount. Similarly, when I am dining out and using a coupon, I always pay tips based on the original amount before the coupon gets subtracted. Otherwise, if I had a coupon for a free meal, my tips would be zero, which wouldn't be fair to the server.

The same rule applies to lottery winnings. For example, if you win a car, you still have to pay the tax based on that car's value, even though that car cost you nothing, so you better have a large chunk of cash ready in order to be able to claim your prize.

Hmm, that's interesting. It can't be a law here because usually I am charged tax only on the discounted price. In fact I've never been charged tax on the pre-discount price at a retail store other than a restaurant. This is how it works online too. Using a coupon at an online store not only reduces the price, but also the tax.

Again, it only happens to me occasionally in a restaurant. It's like the tip... the tip amount can go UP when the prices of meals go up, but of course the tip can't go down if the prices of meals go down. ("Please tip your server based on the amount of your meal before discount.") Oh well, just more reasons to not eat out anymore -- it's healthier and it's saving me a bundle.

[JimInOK]

Here, I think it is probably state law that we pay tax on the value of the coupon we are using. So I would expect to pay tax on the whole $20 worth of meal, even if I got it for $10. Same thing for coupons used in retail stores.

Exactly correct. The restaurant sold you a $20 meal and has to collect and remit taxes on the full $20. How you pay for it (cash or coupon) is irrelevant.

[JimInOK]

Hmm, that's interesting. It can't be a law here because usually I am charged tax only on the discounted price. In fact I've never been charged tax on the pre-discount price at a retail store other than a restaurant. This is how it works online too. Using a coupon at an online store not only reduces the price, but also the tax.

Again, it only happens to me occasionally in a restaurant. It's like the tip... the tip amount can go UP when the prices of meals go up, but of course the tip can't go down if the prices of meals go down. ("Please tip your server based on the amount of your meal before discount.") Oh well, just more reasons to not eat out anymore -- it's healthier and it's saving me a bundle.

Keep in mind that there is a difference between using a coupon to pay for a meal and having a coupon that entitles you to a product at a lower sales price. Using a coupon for payment is not really discounting the menu price. It lowers what you pay out of pocket, but the restaurant will recognize the menu price as sales revenue, all of which is taxable. IE-having a coupon offer to buy a pc at 20% off lowers the sales price and thus the taxable revenue. Having a gift card or something for $20 toward merchandise purchased does not lower the sales price or the taxable revenue, it lowers what you pay out of pocket for that item.

Also, in almost all states, this should not vary from state to state. Most states have signed onto what is known as the "streamlined sales tax." Largely due to increasing internet sales and the problem of loss of state revenue to them (moving us toward taxing all internet purchases that would normally be taxed if bought in a brick & mortar-it IS coming). There are exceptions, but most of the exceptions are for things that fall in gray areas between states. Retail sales tax rules for general purchases are pretty uniform from state to state.

Thanks for the explanation, that makes sense to me.

But then I would argue that it's not really a "coupon" in that situation. It may be a "rebate" or a "gift certificate", but it's not a coupon.

This may have been what happened in my situation... I used a $10 "gift certificate" rather than a $10 "coupon". The only real difference is I end up paying more tax.

[KellyJef]

Let me preface my statement by saying that I was a waitress at an expensive steak house for 10 years and made a very good wage.

What drives "me" crazy about tipping is the absolute stupidity of it.

What in the heck is the logic of tipping a percentage of the bill????

If I wait on a table of 4 who order a pasta dinner for $10 each that means a $6 tip.

If I wait on a table of 4 who order a steak dinner for $30 each that means an $18 tip!

In both cases, I am delivering a "plate" to the customer: why should I get $1.50 to deliver the pasta, but $4.50 to deliver the steak??

I have never understood why customers are expected to subsidize the salaries of a restaurant's employees -- instead of the owner paying his employees' salaries. Personally, I am much more likely to leave a 25% tip for the waitress at the local coffee shop because the owner is not getting rich. The owner of the steakhouse I worked at was a millionaire

[QueenOphelia]

I like to throw my change into the tip cup at Dunkin Donuts when my iced mocha latte is made to my persnickety criteria. Nice and light with an extra shot of chocolate on top!