Quote Originally Posted by Brian Elfert View Post
Is there a law that says a service charge on a restaurant bill has to go to the servers? They did get sued, but I don't recall the outcome. This wasn't an automatic gratuity for large groups like some restaurants, but something that was on every bill.
Brian, as far as I can tell, it's complicated and seems to vary a bit state by state. In some states, the service charge must go to those who provided the service; in others, it can go into general restaurant revenue but in that case the restaurant must pay their servers the federal minimum wage ($7.50?), not the tip-exception rate of $2.13/hr.

IRS regulations that went into final effect this year require that the service charge that goes to employees be considered wages, and taxed accordingly; meaning, the server gets the money but it's taxed as ordinary wage income.