Restaurant Employers May Not Be Able to Claim a Full Tip Credit for Certain Tipped Employees

Normally, tipped employees are paid a fraction of the federal minimum wage ($2.23 in Delaware, $3.63 in Maryland). Tips collected that place the employee’s hourly wage above $5.15 are eligible for a federal credit equal to 7.65% of the excess tips.

A recent federal court ruling denies the tip credit for employees who spend a considerable amount of time performing tasks for which they will receive no tips. Department of Labor regulations state that if an employee spends more than 20% of their time performing general preparation work or maintenance, the tip credit cannot be claimed for that time and the employee would be paid federal minimum wage for those hours.

Applebee’s was taken to court by former and current servers and bartenders. The plaintiffs testified that Applebee’s required them to clean and set up the restaurant before it opened and after it was closed. They were required to clean bathrooms during their shifts, to sweep the restaurant, to clean and stock service areas, roll silverware, and do other duties not directed at specific customers. Applebee’s claimed the tip credit for all work performed by servers and bartenders, even when more than 20% of their time was spent in preparation and maintenance.

The court’s ruling against Applebee’s said it is up to the plaintiffs to provide evidence of hours not properly compensated. If Applebee’s cannot provide documentation of the hours the employees spent on specific duties, then the burden of proof will fall on Applebee’s to show that the plaintiffs’ calculations were unreasonable.

Delaware Revamps Gross Receipts Tax Filing System in 2010

In an effort to reduce costs in Delaware, the State is strongly encouraging businesses to file their gross receipts tax returns online and has ceased mailing out gross receipts tax coupon booklets to area businesses.

Submitting your gross receipts tax online at www.revenue.delaware.gov will continue to be free. The information will be kept secure by Department of Revenue’s security software and will be safe and confidential. This new system was created with the help of the business community and its leadership and should save time and money for both the State and the taxpayers.

“This is just one of the many changes that are taking place in state government to make our operations more efficient. By not mailing gross receipts tax booklets, we estimate that the State of Delaware will save over $100,000 annually in printing and postage costs,” Secretary of Finance Thomas J. Cook said. “Delaware’s gross receipts filing system has been fully tested and we are confident that this is a service businesses want. Paying taxes online is a convenience. No need to first find a remittance coupon or mail a payment, both of which cost businesses time and money,” said Patrick Carter, Director of Revenue for the State of Delaware.

To assist businesses with this change the Division of Revenue is launching two new services. One is “Live Support” or “Live Chat” where businesses can communicate with a Revenue Customer Representative online to help them with any questions. The other is an on-line tutorial program that shows businesses how to file these tax returns. Both services are available through Revenue’s webpage.

Businesses that wish to mail their coupons instead of filing online can still print a paper coupon from the Division of Revenue website: www.revenue.delaware.gov. Coupons should then be mailed to the address listed on the individual coupon. Taxpayers without Internet access or who need filing assistance are asked to gain access to the online filing system at any State of Delaware library.