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Waiter, There's an IRS Agent in My Soup

Joel S. Newman

Wake Forest University - School of Law

Tax Notes, Vol. 40, No. 8, 1988

In the late 1960's, the IRS achieved an auditing breakthrough in discovering unreported tip income, using a method first developed at the Seattle Space Needle Restaurant. This technique was applied and expanded cross-country, notably at the Resorts International Hotel in Atlantic City, NJ. Later, in 1982, Congress entered the fray, mandating that aggregate tips of at least 8% of gross sales had to be reported, by someone, in those establishments at which tipping was customary. The promulgation of proposed regulations ignited angry protests from restaurant employees all across the country. As a result, many restaurants attempted to abolish tipping, substituting a mandatory "service charge" instead.

This article tells the political story of the IRS, Congressional, and Treasury campaigns, and the protests that followed.

Number of Pages in PDF File: 15

Keywords: taxation, tipping, restaurants, casinos

JEL Classification: H20, H26

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Date posted: January 29, 2008  

Suggested Citation

Newman, Joel S., Waiter, There's an IRS Agent in My Soup. Tax Notes, Vol. 40, No. 8, 1988. Available at SSRN: http://ssrn.com/abstract=1088103

Contact Information

Joel S. Newman (Contact Author)
Wake Forest University - School of Law ( email )
P.O. Box 7206
Winston-Salem, NC 27109
United States
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