DAR File No. 31531

Tax Commission, Auditing

R865-19S-94

Tips, Gratuities, and Cover Charges Pursuant to Utah Code Ann. Section 59-12-103

NOTICE OF PROPOSED RULE

DAR File No.: 31531
Filed: 06/05/2008, 03:04
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

S.B. 147 (2003) amended the definition of sales price to include a charge by the seller for any service necessary to complete the sale. (DAR NOTE: S.B. 147 (2003) is found at Chapter 312, Laws of Utah 2003, and was effective 07/01/2004.)

Summary of the rule or change:

The proposed amendment deletes language indicating that if a tip is included on a patron's bill and the total amount of the tip is passed on to the server, the tip is not subject to sales tax. The current definition of sales price includes a charge by the seller for any service necessary to complete the sale. Thus, all tips included on a patron's bill are subject to sales tax.

State statutory or constitutional authorization for this rule:

Section 54-12-103

Anticipated cost or savings to:

the state budget:

None--Any fiscal impact was taken into account in S.B. 147 (2003).

local governments:

None--Any fiscal impact was taken into account in S.B. 147 (2003).

small businesses and persons other than businesses:

None--Any fiscal impact was taken into account in S.B. 147 (2003).

Compliance costs for affected persons:

None--Restaurant patrons who are billed for a tip are subject to sales tax on that tip, regardless of whether the tip is passed on to the server.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no anticipated fiscal impacts. D'Arcy Dixon, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY UT 84134

Direct questions regarding this rule to:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2008

This rule may become effective on:

08/07/2008

Authorized by:

D'Arcy Dixon, Commissioner

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-94. Tips, Gratuities, and Cover Charges Pursuant to Utah Code Ann. Section 59-12-103.

[A.](1) Restaurants, cafes, clubs, private clubs, and similar businesses must collect sales tax on tips or gratuities included on a patron's bill [and which]that are required to be paid[, unless the total amount of the gratuity or tip is passed on to the waiter or waitress who served the customer].

(a) Tax on the required gratuity is due from a private [clubs]club, even though the club is not open to the public.

(b) Voluntary tips left on the table or added to a credit card charge slip are not subject to sales tax.

[B.](2) Cover charges to enter a restaurant, tavern, club or similar facility are taxable as an admission to a place of recreation, amusement or entertainment.

 

KEY: charities, tax exemptions, religious activities, sales tax

Date of Enactment or Last Substantive Amendment: [February 25], 2008

Notice of Continuation: March 13, 2007

Authorizing, and Implemented or Interpreted Law: 59-12-103