8003R0152D06



STATE OF TEXAS 
COMPTROLLER OF PUBLIC ACCOUNTS 
STATE SALES AND USE TAX 


Section 3.337.  Gratuities.  (Tax Code, sec. 151.007(c)(10))

(a)  Definitions.

(1)  Voluntary gratuity - A tip added to the bill at the suggestion of the 
purchaser or money given freely by the purchaser over and above the sales 
price.

(2)  Mandatory gratuity charge - Any amount required by the seller for the 
service of meals and food products including soft drinks and candy for 
immediate consumption.

(3)  Reasonable mandatory gratuity charge - Mandatory gratuity charges which do 
not exceed 20% of the sales price.

(4)  Employees who customarily and regularly provide the service upon which the 
charge is based - Includes but is not limited to waiters, waitresses, busboys, 
service bartenders, wine stewards, and maitre d'hotel but excludes janitorial 
help, chefs, cashiers, and dishwashers.

(b)  Voluntary gratuities.  Voluntary gratuities are specifically excluded from 
the sales price of taxable items.

(c)  Mandatory gratuity charges.

(1)  Reasonable mandatory gratuity charges are specifically excluded from the 
sales price of taxable items.

(2)  The mandatory gratuity charge must be:

(A)  separated from the sales price of the meal or food product served for 
immediate consumption;

(B)  identified as a tip or gratuity; and

(C)  the full amount of the mandatory gratuity charge must be disbursed to 
employees who customarily and regularly provide the service upon which the 
charge is based.  If any portion is retained by the employer, the entire 
gratuity will be subject to sales tax.

(d)  Records.  The retailer must maintain records which demonstrate that the 
full amount collected as mandatory gratuity charges has been disbursed to 
qualified employees.  In order to comply with this requirement, the records 
must show:

(1)  all mandatory gratuity charges collected from customers and the 
corresponding disbursements to each qualified employee; or

(2)  that the total direct compensation due all qualified employees during each 
sales and use tax reporting period equals or exceeds the total amount collected 
as mandatory gratuity charges during the same period.


Effective Date:  March 28, 1980 
Filed with Secretary of State:  March 14, 1980 


  
Comptroller of Public Accounts 




ACCESSION NUMBER: 8003R0152D06   
SUPERSEDED: Y  
DOCUMENT TYPE: R 
DATE: 03/28/1980
TAX TYPE: SALES