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BTLG Table of Contents > Sales and Use Tax Court Decisions > G > GMRI, Inc. v. California Department of Tax and Fee Administration … (2018)

Sales And Use Tax Court Decisions

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GMRI, Inc. v. California Department of Tax and Fee Administration … (2018)

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Regulation 1603(g) providing that Large Party Gratuities are a "Mandatory Payment" and Thus Subject to Sales Tax Upheld as Valid

A restaurant operator challenged the validity of Regulation 1603, subdivision (g), and disputed whether a 15- or 18-percent gratuity that restaurant managers automatically added to parties of eight or more without first conferring with the customer amounted to a "mandatory payment designated as a tip, gratuity, or service charge" under Regulation 1603, subdivision (g), and therefore part of the company’s taxable gross receipts. The court of appeal upheld the validity of Regulation 1603, subdivision (g), and affirmed the trial court’s conclusion that the large-party gratuity amounted to a mandatory payment under Regulation 1603, subdivision (g). GMRI, Inc. v. California Department of Tax and Fee Administration (2018) 21 Cal.App.5th 111.