Hotel's Service Charge and Tax on a discounted price (Austin: sales, credit card)

[BizTraveler]

I was at an Austin hotel where I had large group food catering. I negotiated a discount on the food up front. I expected their Service Charge and Tax to be applied to the price after the discount was applied. They charged both based the original, non-discounted, amount. It's not specified either way in the contract. Does anyone know if this is legal?

I could not find anything on the Service Charge, but found that in Texas "the sales tax applies to the price after the discount is applied”, so I know I can dispute that, but I want to know if I can dispute the 23% Service Charge.

Thanks for your help.

[DMChicago]

Have you called the place you ordered it from? Could just be an oversight.

[CptnRn]

Sounds like you can debate the tax, but I'd be surprised if there are any laws regarding the service charge. Next time you will know to explicitly negotiate both.

[cBach]

You can negotiate the taxes but not the service charge.

[TexasRedneck]

Look at the verbiage on the service charge - if it's based on the bill, then you should be able to make the argument that the bill is the amount actually owed. Sounds to me like they're trying to do a "clawback" to recoup some of the discount.

[BizTraveler]

UPDATE: After going back and forth several times (2+ months), the hotel did finally make the discount on food before the service charge and tax were calculated. The difference was about $2000 finally in my favor.

By the way, the 23% service charge is made up of "13% to the staff as tip and 10% to the hotel itself not distributed as tip". If it had been 23% ALL to the staff as tip, I might not have been as headstrong about fighting this. The tax should have been charged on discounted amount for state tax laws.

It is absolutely something I would make sure is called out more clearly in future contracts. Their catered food was incredibly overpriced (price per person) for breakfast, am/pm snacks and lunch.

[astrohip]

Originally Posted by BizTraveler

By the way, the 23% service charge is made up of "13% to the staff as tip and 10% to the hotel itself not distributed as tip". If it had been 23% ALL to the staff as tip, I might not have been as headstrong about fighting this. The tax should have been charged on discounted amount for state tax laws.

Wow, that is just complete and utter BS. I'm with you, if it had been all tip, maybe not squeal so loud, but when almost half of it is just more hotel money... yeah, I'd complain.

I'd also make sure social media gets this. Maybe Yelp or Twitter or anywhere else it could have an effect. That's simply raising prices 10%, it's not a "service charge", which most people interpret as a tip to the waitstaff.

This raises a question: When a restaurant charges that 18% or 20% service charge on large parties, is it 100% treated the same as a tip, or does it get split like your charge? Anyone in the industry know?

[FromCalitoSteinerRanch]

Originally Posted by BizTraveler

... and 10% to the hotel itself not distributed as tip". ...

Ouch! I will never complain about Papa John's ~$3 Delivery Charge which is noted that it is not a tip to the driver! OK, I will probably still complain about it, but at least I will know these charges are just more BS ways to not have price transparency.

[Trainwreck20]

Originally Posted by astrohip

This raises a question: When a restaurant charges that 18% or 20% service charge on large parties, is it 100% treated the same as a tip, or does it get split like your charge? Anyone in the industry know?

The restaurant treats it identically to any other tip; however, 'regular' tips are distributed quite a few ways in some cases - tip out to bartender, busers, sometimes host(ess), etc. If the employment contract specifically allows it, then a small surcharge may be placed on charged tips to 'recoup' the credit card fees applied to the amount of the tip. I have most often seen 3% taken from charge tips, but I am sure there are others. Many restaurants don't even bother and if it is not in a contract it is not technically legal.