Ezel / Tax Rulings / TX
TX 8606L0743B06 Sales and/or Use Tax (State,Local,MTA) 1986-06-30

Could a restaurant calculate its clearly stated 15% gratuity on food plus sales tax, or did it have to calculate the gratuity only on food sales?

Short answer: Either method was acceptable on the stated facts. The entire gratuity went directly to the waiter and was clearly identified on the guest's check.

Apply this to your situation

This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The restaurant added sales tax to food sales and then added a clearly identified 15% gratuity that went entirely to the waiter.

The requester asked whether the gratuity should be calculated on food plus tax or on food sales alone. The Comptroller said either method was acceptable.

Common questions

Could the restaurant calculate the gratuity on food plus sales tax? Yes.

Could it instead calculate the gratuity only on food sales? Yes.

What facts did the letter emphasize? The 15% gratuity went directly to the waiter and was clearly identified on the guest's check.

Source

Original ruling text

June 30, 1986

Dear ***:

Thank you for your recent letter which is restated with response below.

I have a question about the way we are totaling our food checks
with a gratuity at our restaurants.

First of all, we are in compliance with the state law on gratuities.
We add up our food sales, add tax to that amount, sub-total and
then add 15% gratuity to this sub-total.

Example: Food Sales + Sales Tax + 15% Gratuity = Total

All of the 15% gratuity goes directly to the waiter and it is clearly
identifiable on the guest's check.

Now my question is whether we should be figuring the 15% gratuity
from a) the total sum of food and tax? or b) just the total sum of
the food sales (without tax)?

Response: Either method is acceptable.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division

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