topic Re: How many of you withhold an amount from credit card tips? in Back Office & Team

How many of you withhold an amount from credit card tips?

AMCharney — Thu, 16 Nov 2023 20:10:45 GMT

We recently started withholding a low estimate (2.5%) of credit card tips to partially offset the CC processing cost. I'm wondering how many users are doing that. Assuming revenue of 750K annually with an 18% average tip level, the CC processing fee offset comes to about $3375 a year, so it's not necessarily an immaterial charge to profitability.

Thoughts anyone?

Re: How many of you withhold an amount from credit card tips?

JimmyD99 — Sat, 18 Nov 2023 04:22:02 GMT

Yep. 3%. Don't know people wouldn't.

Re: How many of you withhold an amount from credit card tips?

Zerelda — Sat, 18 Nov 2023 21:00:04 GMT

Most restaurants I've worked at do not. So far, about 2 in 30 restaurants I've been at.

Re: How many of you withhold an amount from credit card tips?

Billiards — Sun, 19 Nov 2023 18:59:40 GMT

We bury the cost into our pricing. Heard to many customers complain about other places they will not go because the fee. I would rather have more customers than less.

Re: How many of you withhold an amount from credit card tips?

QsPub — Thu, 23 Nov 2023 00:45:41 GMT

I would check with your accountant depending on your corporate structure. In Colorado, if you charge your servers CC processing fees for TIPS, then I believe you lose out on the credits you receive on IRS Form 8846, which could potentially be much higher. For example, tips received was 300,000 for the year, the credit would be approximately 23,000 that is reported on Schedule K1.