200602467R


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

Section 3.337.  Gratuities.

(a)  Definitions.  The following words and terms, when used in this section, 
shall have the following meanings, unless the context clearly indicates 
otherwise. 

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

(2)  Qualified employees--Employees who customarily and regularly provide the 
service upon which a gratuity is based, including, but not limited to, waiters, 
waitresses, busboys, service bartenders, wine stewards, and hotel maitre d', 
but excluding janitorial help, chefs, cashiers, and dishwashers.   

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

(4)  Total direct compensation--Total salaries paid to qualified employees.  
The term does not include other benefits paid or incurred on an employee's 
behalf, such as health and life insurance, sick leave, or vacation time. 

(5)  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.

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

(c)  Mandatory gratuity charges. 

(1)  Reasonable mandatory gratuity charges are excluded from the sales price of 
taxable items if they are: 

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

(B)  identified as a tip or gratuity by any reasonable means, including such 
terms as service fee or service charge; and

(C)  disbursed to qualified employees.  Any portion of a reasonable mandatory 
gratuity charge that is retained by the employer is subject to sales tax.

(2)  Mandatory gratuity charges in excess of 20% are subject to sales tax 
regardless of how they are disbursed. 

(d)  Records.  The employer must maintain records that demonstrate the amount 
of mandatory gratuity charges that have been disbursed to qualified employees.  
In order to comply with this requirement, the records must show: 

(1)  the amount of 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 equals or 
exceeds the total amount collected as mandatory gratuity charges.  

Effective Date:  February 16, 2006.
Filed with Secretary of State:  January 27, 2006.







ACCESSION NUMBER: 200602467R
SUPERSEDED: Y  
DOCUMENT TYPE: R
DATE: 02/16/2006
TAX TYPE: SALES