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New IRS rule has restaurant owners re-thinking automatic tips

How much do you tip a server when you eat at a restaurant?
If you have eaten out with a large group, you may have seen that automatic gratuity on your check.
Many restaurants add a 15- 18% tip to the bill for parties of 8 or more.
But now a new IRS rule may change that.
An updated tax rule is causing restaurants to re-think adding automatic tips on their bills.
Russell Brungrager eats out a lot because he has to travel for his job. Tipping a server is something he does several times a week.

"I don't really appreciate them sticking the tip on the check."
Starting in January. The IRS will begin classifying automatic gratuities as a service charge- which it treats as regular wages, subject to payroll taxes . The idea of an automatic gratuity was adopted in a effort to make sure servers weren't stiffed on large tabs.

Nick Zangari- Owner, New York Nicks
"No one should be told what to tip but what they should have is a guide. Here's what 10 % is, 15% is, here's what 20% is."

Restaurants like the Olive Garden, Red Lobster and other corporate owned establishments once included an automatic 18 % tip on the bill for parties of 8 or more.

Those eateries are now experimenting with eliminating the auto- tips after the IRS ruling.

Russell Brungrager- Customer
"You could have really lousy service and still have to pay and 18 % tip, which is a lot of money in some restaurants."

 The owner of New York Nicks in Downtown Pensacola says the ruling is fair and customers shouldn't be forced to pay a tip they don't feel is deserved.

Nick Zangari- Owner, New York Nicks
"It's going to be interesting how they try and enforce it and how restaurants respond to it."

The new rule does not pertain to suggested tips that can appear on the bottom of a bill.